Jody M. Walker
Attorney At Law
7841 South Garfield Way
Tel: 303-850-7637 Centennial, CO 80122 Fax: 303-482-2731
November 25, 2008
Kevin Dougherty
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549-3561
RE: Community Alliance, Inc.
Amendment 1 to Registration Statement on Form 10
Filed September 10, 2008
File No. 0-53406
Dear Mr. Dougherty:
Pursuant to your comment letter dated October 9, 2008, please note the
following responses.
General
1. We note your discussion in the business section and the disclosure
in a Form 8-K filed on September 9, 2008 by Fresh Ideas Media, Inc.,
your parent company, regarding the plan to spin-off Community Alliance
and distribute its shares to the shareholders of Fresh Ideas Media.
Please provide us with a detailed analysis as to why you believe the
spin-off is not a "sale" of the securities by the parent and does not
need to be registered under the Securities Act of 1933.
Pursuant to Staff Legal Bulletin #4, Community Alliance spin-off meets
the five conditions described below and therefore, does not have to
register the spin-off under the Securities Act
a. The Fresh Ideas' shareholders do not provide consideration
for the spun-off shares.
b. The Fresh Ideas' shareholders have the same proportionate
interest in Fresh Ideas' and Community Alliance both before and
after the spin-off.
c. Fresh Ideas is a reporting company and has provided its
shareholders an information statement that describes the spin-off
and the subsidiary and complied with Regulation 14C under the
Exchange Act; and
Community Alliance is registering the spun-off securities
under the Exchange Act in this registration statement
d. The primary purposes of the Spin-Off are to (a) allow the
management of the Company to focus on the Company's primary
business operations in China, (b) allow the management of
Community Alliance to focus exclusively on Community Alliance's
marketing and advertising business, and (c) enhance access to
financing for each of Community Alliance and Fresh Ideas by
allowing the financial community to focus separately on Fresh
Idea's Chinese operations and the business and operations of
Community Alliance
e. Fresh Ideas formed Community Alliance in February 2005.
2. We further note disclosure in the Form 8-K indicating that among
the primary purposes of the Community Alliance spin-off are to allow
the management of Fresh Ideas Media to focus on its primary business
operations in China, and to allow the management of Community Alliance
to focus on its marketing and advertising business, though this is
subject to the consummation of the proposed share exchange. Please be
advised that we are currently considering the information statement
filed as an exhibit to the 8-K and will provide comments under separate
cover.
No response required.
Item 1. Business
3. Please revise your disclosure concerning the proposed share
exchange between Fresh Ideas Media, Ever Auspicious International
Limited, and Ever Auspicious' sole shareholder Bright Praise
Enterprises Limited to describe the transaction in more precise and
materially complete terms. For example, please clarify what shares are
being exchanged and discuss the impact of the transaction on Community
Alliance and the parent company both with respect to the management and
shareholders of each entity. Ensure that the economic impact of the
transaction is also addressed. Consider including a recent
developments subheading under which the terms of the proposed share
exchange and spin-off are described.
The proposed share exchange disclosure has been expanded to
describe the transaction in more precise and materially complete
terms under a "Recent Developments" subheading.
4. Consider revising this section to present related information
together under a discrete subheading. For instance, consider
discussing the 2005 and 2008 Venitech license agreements relating to
the operating take-home folders business under a single subheading.
Additionally, you may wish to discuss all of the information relating
to the take-home folder business first, followed by a discussion of the
greeting card business, which is not yet operational.
The disclosure has been revised to organize related information.
License Agreement - 45 states
5. Please include a materially complete description of the 2005
Venitech license agreement and disclosure which five states were
excepted from the license agreement and why. Please ensure that you
disclosure the license fees associated with the agreement, including
expected payments to Venitech with respect to the sale of sublicenses
under the agreement. In addition, please disclose the minimum number
of sublicenses that must be sold for each year specified as well as the
consequences of failing to meet the minimum sale requirements. To the
extent any of the fees and payments have not been paid according to the
agreement terms, this should be disclosed. Note that this comment also
applies to the disclosure relating to the 2008 Venitech license
agreement.
The disclosure has been revised.
6. Clarify whether any of your sublicensees outside of Colorado has
actually implemented the take-home folder program with any schools.
The extent to which you have actually implemented the take-home folder
program in any state should be clear from your disclosure.
The disclosure has been revised.
7. Please provide support for your belief that you can "build a
substantial advertising enterprise in the 52 identified territories"
covered by the license agreement. In your response, please address you
statement that you have sold four sublicenses since inception, only one
of which has been paid in full, and provide your anticipated timeframe
for expanding your operations to other states.
The statement has been deleted for clarity and accuracy.
Sub-License Agreement with Our Best Wishes
8. Please revise this section to include when you expect Our Best
Wishes direct mail greeting business to begin operations. Specifically
address whether you expect the greeting card business to be operational
within the next 12 months.
The disclosure has been revised as follows:
We intend to start testing the greeting card program in the
second quarter of 2009 and offering the program to Sub-licensees
in the third quarter of 2009.
9. We note that you disclose a sublicense fee of $15,000 for the non-
operational greeting card business but have not disclosed the
sublicense fee for the operating take-home folder business in this Form
10. Please revise to provide this information.
The sublicense fee has been disclosed.
License Agreement - Colorado
10. You state that you entered into a license agreement with Venitech,
LLC for the right to publish and market two advertising products, the
Community Alliance Custom School Take-Home Folder and Our Best Wishes
Direct Mail Greeting Card, for the state of Colorado. However, Article
4 to Exhibit 10 to the registration statement states that the territory
of the license is for the state of Colorado, except for Jefferson
County, the second most populous county in the state. Please revise
your filing to include this information. To the extent Venitech has
operations in Jefferson County related to this business concept which
generate a material portion of its revenues, please disclose this as
well.
The disclosure has been revised as follows:
On February 6, 2008, we entered into a license agreement which
Venitech, LLC for the rights to publish and market two
advertising products, the Community Alliance Custom School Take-
Home Folder and Our Best Wishes Direct Mail Greeting Card in the
state of Colorado with the exception of Jefferson County.
Venitech, LLC desires to retain Jefferson County for the time
being.
11. In this section you state that the terms of the 2008 Venitech
license agreement was for a period of five years through May 15, 2010.
However, Article 8 of Exhibit 10 to the registration statement provides
a termination date of February 6, 2010, with a three-year renewal
option provided certain conditions are met. Also, you state that you
sold three sublicenses prior to March 14, 2006, as required under the
agreement, though the license agreement for Colorado was not formed
until 2008. This section appears to intermingle the terms of the 2005
and 2008 license agreements. Please revise this section to provide
disclosure that is consistent with the filed license agreements or
advise.
The disclosure has been revised for accuracy.
Revenues
12. Please clarify your statement regarding the status of the four
sublicenses which you claim you sold since inception. You state of the
four sublicenses sold, one was paid in full, one has been cancelled for
non-payment and it is doubtful whether the other three sublicensees
will be able to meet the required payments. In your revision, please
also clarify which sublicense has paid in full, and what payments, if
any, have been made by the other sublicensees.
The disclosure has been clarified as follows:
We have been selling and will continue to sell sub-licenses for
the school folder program. We have established a one-time sub-
license fee of $15,000 except for the first five territories sold
which we have set at $10,000 in order to induce five persons to
purchase sub-licenses.
Community Alliance Custom School Take-Home Product
13. Please provide a more complete description of the sources from
which you expect to generate revenue, namely the sale of sublicenses at
$15,000 each, or $10,000 for the first five sold, and publication fees
from the publication of school folders at $1,900 per school. You
should include a discussion of requirements associated with the
sublicenses, such as that each sublicense is required to use Community
Alliance as the publisher of its folders.
The disclosure has been revised as follows:
We expect to generate revenue from the sale of the Sub-licenses,
which after the first five are sold, it is our intent to sell the
remaining Sub-licenses for $15,000 per sub-license. In addition,
we will generate revenue from the publication fees of $1,900 per
school. For example, if a Sub-licensee has 10 schools under
contract during one school period, the publication fee would be
$1,900 per school or a total of $19,000. Under the Sub-license
Agreement, each Sub-licensee is required to use Community
Alliance as the publisher of the folders. Our actual cost of
production will depend upon several factors, including the extent
of the art work involved and the printing cost of the folders.
We also intend to generate revenue from own operations in
Colorado, which we now operate under a license agreement.
14. We note that two of the four licenses sold were sold to family
members of Mr. Ray, your President and CEO. Please disclose which of
the licenses referenced were sold to family members and clarify whether
either of them is among the non-performing sublicenses.
The disclosure has been revised.
15. Please discuss your dependence on your customers/licensees as it
appears your revenues are generated by fee customers. See Item
101(h)(4)(vi) of Regulation S-K. In addition, please file the
sublicense agreements on which your business is substantially dependent
as exhibits to the registration. See Item 601(b)(10)(ii)(B) to
Regulation S-K.
The disclosure has been revised as follows:
The success of our business will depend totally upon our ability
sell sub-licenses in the future for the School Home Folders and
the Birthday Greeting Cards. In addition, it is contemplated
that additional revenues would be generated from the production
cost for the folders and greeting cards, which depend upon the
success of each of our Sub-licensees in the future. If our Sub-
licensees are not successful in their efforts in contracting with
schools and selling the advertising for the folders, we will not,
in turn, receive that additional on going revenue. (
The sublicense agreements have been filed as exhibits.
Trademarks, Patents and Intellectual Property
16. It does not appear from your disclosure that you currently utilize
trademarks or patents. To the extent that you do not currently rely on
trademarks or patents, please include an affirmative statement to this
effect.
The disclosure has been revised to include an affirmative
statement that Community Alliance does not currently rely on
trademarks or patents.
Item 2. Financial Information
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Trends and Uncertainties
17. You disclose that there are no know trends, events or
uncertainties that have or are reasonably likely to have a material
impact of your short term or long term liquidity and that believe there
will be sufficient capital from revenues to sustain operations. This
does not appear to be consistent with your disclosure elsewhere
regarding the apparent challenges you have encountered in selling and
obtaining full payment for sublicenses. Please revise this section to
include a discussion of the nonperformance of three of four of your
existing sublicense agreements to date, which appears to constitute a
known trend or uncertainty that may have a material adverse effect on
your liquidity position.
Capital and Source of Liquidity
18. You disclose that there will be "sufficient capital from revenues
to conduct operations for the next twelve months." Please provide
support for this statement in quantified terms and specifically address
how you expect to meet your cash requirements to sustain operations for
the next 12 months. If you are unable to establish that your current
cash resources will be sufficient to fund your planned operations for a
period of at least 12 months, including the increased costs associated
with becoming a public company, state the number of months your current
cash resources will fund planned operations and the amount required to
sustain operations for the remaining months. To the extent you plan to
rely on the sale of company assets or other means to fund operations
for the remaining months, please include an unambiguous statement to
this effect and disclose any material uncertainties regarding the
ability to obtain funds in needed amounts from such sources. Please
see Item 303(a)(1) of Regulation S-K and Instructions 2 and 3 to Item
303(a)( of Regulation S-K for additional guidance.
We now have the License for the major part of the State of
Colorado, which is a going business and generating revenues. As
a result, we believe there will be sufficient capital from
revenues to conduct operations for the next twelve months. The
Colorado operation has been generating from between $70,000 to
$100,000 in annual revenues. The company presently has very
little expenses, except for legal and accounting which are
associated with being a public company. The company pays no
salaries and only pays commissions on sales. The Company does
not pay rent or other expenses for offices at this time.
We are planning on commencing the sale of Sub-licenses in the
first quarter on 2009.
If additional capital is needed, the president of the Company is
prepared to supply additional capital on a loan basis.
Results of Operations
19. This section requires significant revision. We note a number of
instances where you identified a material change in the results of
operations from one period to the next without discussing the factors
that contributed to the change. For instance, you disclose that
revenues increased from $4,491 for the six months ended May 31, 2007 to
$16,126 for the six months ended May 31, 2008 without discussing the
factors that contributed to the material increase. As another example,
you state that operating expenses increased from $3,455 to $24,789
during the same periods and that the increase was due to "increased
operations." The discussion regarding the changes in results of
operations should be meaningful to readers. For instance, you migh
clarify whether the revenue increase was due to the sale of
sublicenses, publication fees, or some other source and explain which
you believe the revenues increased as compared to the prior period. As
yet another example, you disclose a significant decrease in net income
from $1,036 to $(24,789), again during the same periods, and state that
the decrease was primarily due to "completion of the public offering
and subsequent decrease in offering costs." Please explain this
statement or revise if this was stated in error. In revising this
section, note that where a material change occurs you should disclose
the underlying contributing factor(s). Where you identify two or more
contributing factors, the contribution of each factor must be given in
quantified terms. See Section III.D of SEC Release No. 33-6835.
Please revise this section accordingly.
The disclosure has been revised to discuss contributing factors.
Item 4. Security Ownership of Certain Beneficial Owners and Management
20. We note that you have provided the information required pursuant
to Item 403 of Regulation S-K "Adjusted for Company of Spin-Off."
Please provide a separate beneficial table as of the most recent
practicable date with respect to your existing security ownership,
without taking into account the proposed spin-off.
A separate beneficial table as of the most recent practicable
date has been added.
21. In addition, in the beneficial ownership table with respect to your
existing security ownership, please include disclosure regarding
management's beneficial ownership in its parent, Fresh Ideas Media, and
in its subsidiary, Our Best Wishes. See Paragraph (b) of Item 403 of
Regulation S-K.
The disclosure has been revised as follows:
Current Shareholdings in Fresh Ideas. Phillip E. Ray is the
beneficial owner of 1,800,000 shares of Fresh Ideas common stock
through his direct ownership of 1,250,000 shares of Fresh Ideas
common stock and through his positions as the sole officer,
director and shareholder of American Business Services, Inc.,
which owns 250,000 shares of Fresh Ideas common stock, and the
majority shareholder and sole officer and director of VentureVest
Capital Corporation, which owns 300,000 shares of Fresh Ideas
common stock.
A. Terry Ray is the beneficial owner of the 1,800,000 shares of
Fresh Ideas common stock directly and indirectly held by her
spouse, Phillip E. Ray.
Ruth Daily is the beneficial owner of 1,250,000 common shares of
Fresh Ideas.
Our Best Wishes is a wholly owned subsidiary of Community Alliance.
22. Please clarify, if true, that the spin-off of Community Alliance's
shares to the shareholders of its parent, Fresh Ideas Media, will not
result in Bright Praise becoming a shareholder of Community Alliance or
advise.
It has been clarified that Bright Praise will not be a
shareholder of Community Alliance as a result of the spin-off.
Item 5. Directors and Executive Officers, Promoters and Control
Persons
23. Please disclose the nature of any family relationship between
Phillip E. Ray and A. Terry Ray in this section. See Item 401(d) of
Regulation S-K.
The fact that A. Terry Ray is the spouse of Phillip E. Ray has
been disclosed.
24. The disclosure regarding Mr. Ray's business experience does not
reference his involvement in Venitech, LLC. However, we note that Mr.
Ray signed an addendum to the Licensing Agreement with Venitech in his
capacity as President of Venitech, LLC. See Exhibit 10.14 to the Form
SB-2 filed with Fresh Ideas Media on February 22, 2007. Please confirm
whether Mr. Ray is or was President of Venitech. If true, please
revise this section, the related transactions section, and throughout
your filing as appropriate.
Mr. Ray has never had an involvement in Venitech. The addendum
was incorrectly edgarized. Ms. Daily's signature was
inadvertently omitted. Mr. Ray signed on behalf of Fresh Ideas.
25. We note your disclosure with respect to Ms. Daily's business
experience that Community Alliance of Colorado" is generating between
$80,000 and $110,000 in revenue" through the take-home folder program
whereas you disclose in the business section under the heading "License
Agreement - Colorado" that this business generates annual revenue of
between $60,000 and $110,000. Please revise as appropriate to provide
accurate and consistent disclosure.
The disclosure has been revised for accuracy.
Item 7. Certain Relationships and Related Transactions and Director
Independence
26. Please describe the 2008 license agreement with Venitech, which
appears to be a related party agreement with respect to Ms. Daily and
Mr. Ray. Include a discussion of the commissions to Ms. Daily under
the contract. Please refer to paragraphs (a) and (d) of Item 404 of
Regulation S-K and the related instructions. Note that as a smaller
reporting company, you must provide disclosure under this section since
the beginning of the fiscal year preceding your last fiscal year. In
addition, please include disclosure responsive to Item 404(d)(3) of
Regulation S-K, which should address the existing parent-subsidiary
relationship between Fresh Ideas Media and Community Alliance,
irrespective of the spin-off.
The disclosure has been revised as follows:
On February 6, 2008, Fresh Ideas entered into a License Agreement
with Venitech, LLC for the School Folders in the State of
Colorado, with the exception of Jefferson County in that state.
Venetich, LLC had been operating the School Folder business in
the state of Colorado for a number of years and had 37 schools
under contract for the school folders. Ruth Daily, the president
of Venitech, LLC, is a major shareholder of Fresh Ideas Media,
owning 19.9 % of Fresh Ideas, and as soon as the spin-out of
Community Alliance, Inc., the wholly owned subsidiary, is
completed, Ms. Daily will be a major shareholder of Community
Alliance, Inc. On February 4, 2008, Ms. Daily was elected to the
Board of Directors and appointed as Treasurer of Community
Alliance.
Item 9. Market Price of Dividends on the Registrant's Common Equity
and Related Stockholders Matters
27. Please disclose the amounts of common equity that are required to
be disclosed under paragraph (a)(2) of Item 201 of Regulation S-K.
The required amounts of common equity have been disclosed.
Item 15. Financial Statement and Exhibits
28. Please include updated financial statements before effectiveness
pursuant to Rule 8-08 of Regulation S-X. Please also update the
disclosure regarding material changes during the interim period in
management's discussion and analysis of financial condition and results
of operations. See Item 303(b)(1) and (b)(2) of Regulation S-K.
The financial statements have been updated and the disclosure has
been updated as appropriate.
Exhibits
29. Please file a list of all subsidiaries, including Our Best Wishes,
Inc. See paragraph 21, of Item 601 of Regulation S-K.
A list of all subsidiaries has been included as an exhibit.
30. We note that Exhibit 10.14 to Form SB-2A filed on February 22,
2007 contained an "Addendum to Licensing Agreement" between Venitech,
LLC and Fresh Ideas Media, Inc. dated January 16, 2007. Please file
the addendum as an exhibit to this Form 10 pursuant to Item 601(b)(10)
of Regulation S-K.
The addendum has been filed as an exhibit. Additionally, a
further addendum dated October 30, 2007 to the same agreement has
been filed as an exhibit.
31. Please file any agreements made in connection with the spin-off in
response to Item 610(b)(2) of Regulation S-K.
The Share Exchange Agreement dated November 11, 2008 has been
attached as an exhibit.
Very truly yours,
/s/Jody M. Walker
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Jody M. Walker