[netGuru letterhead]
November 2, 2006
Via Edgar Correspondence
Mr. Mark P. Shuman
Mail Stop 4561
United States Securities and Exchange Commission
Washington D.C. 20549-0303
Re: netGuru, Inc.
Revised Preliminary Proxy Statement on Schedule 14A
Filed on October 27, 2006
File No. 0-28560
Dear Mr. Shuman:
With the permission of Ms. Mills-Apenteng, we have prepared and filed
via EDGAR a definitive proxy statement that contains revisions in response to
your comment letter dated October 31, 2006 and some verbal comments received on
November 1, 2006 from Ms. Mills-Apenteng. This cover letter keys our responses
to your comments and provides any requested supplemental information.
Schedule 14A
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Summary of Proposed Reverse Merger, Sale, Name Change, Reverse Stock Split and
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Increase in Authorized Preferred, page 4
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1. Please refer to prior comment 3. Please revise the disclosure on page
59 regarding the outsourcing services agreement to disclose the
approximate monthly or annual base payments, such as the gross pay plus
a $500 monthly fee per employee, to be made to REL. We note your
statement that other work will be provided under the agreement at the
rates you disclose. Also, confirm that the outsourcing services
agreement does not require that netGuru pay fees in addition to gross
pay plus $500 per month, hourly wages and a 10% processing fees or
otherwise revise your disclosure.
Mr. Mark P. Shuman
November 2, 2006
Page 2
The disclosure has been revised to indicate that the monthly base
salaries total approximately $4,500 per month. We confirm that the outsourcing
services agreement does not require that netGuru pay fees other than those
disclosed.
General, page 38
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2. We refer you to prior comment 6 and note your revised disclosure that
netGuru has provided additional specific disclosures in your public
filings to the extent that it is aware of the existence of any material
facts that are required under federal securities law and might
otherwise contradict the representations and warranties contained in
the agreements. However, we still note your disclosure that "[t]he
attached agreements are not intended to change or supplement the
disclosures contained in the public reports we have filed with the
Commission." These statements appear to be inconsistent and the latter
statement creates the impression that the agreements are not public
disclosures. Please remove this disclosure or revise.
The statement that "[t]he attached agreements are not intended to
change or supplement the disclosures contained in the public reports we have
filed with the Commission" has been removed.
Background of the Merger and Sale Transaction, page 37
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3. Please refer to prior comment 7. We note your disclosure on page 39
that ISI's role was not to provide any formal reports, opinions or
appraisals relating to the merger and sale transactions. Nevertheless,
please confirm that ISI did not provide the special committee and/or
the board of directors with a report, opinion or appraisal materially
relating to the transaction you would be required to provide the
information required by Item 1015 of Regulation M-A, applicable to you
through Item 14(b)(6) of Schedule 14A.
We have reviewed Item 14(b)(6) of Schedule 14A, which states that "If a
report, opinion or appraisal materially relating to the transaction has been
received from an outside party, and is referred to in the proxy statement,
furnish the information required by Item 1015(b) of Regulation M-A." We confirm
that ISI did not provide the special committee and/or the board of directors
with a report, opinion or appraisal such that we would be required to provide
the information described in Item 1015.
4. Please refer to prior comment 13. You state that in the April 21, 2006
meeting "it became evident that BPOMS was interested in acquiring our
United States operations and not our Indian operations." However, you
also disclose that BPOMS had initially offered $4.0 million, which
suggests that BPOMS was interested in purchasing netGuru in its
entirety. Please revise to clarify. You further state that it was in
the April 21 meeting that Mr. Das first proposed the separate sale of
the Indian operations to him and his affiliates and proposed a purchase
price of $2.5 million. Include a brief discussion regarding the reasons
given for offering that amount. Did Mr. Das rely on any third parties
in determining this offer amount?
Mr. Mark P. Shuman
November 2, 2006
Page 3
Clarifying disclosure has been added. Also, disclosure has been added
to indicate that Mr. Das based the $2.5 million purchase price on his own
personal assessment of the assets and liabilities he proposed to acquire.
5. Although you disclose on page 41 that the special committee instructed
Mr. Mulvaney to continue to communicate with the third party,
additional disclosure regarding Mr. Mulvaney and the third party are
not discussed in your background section. Please revise to explain the
further negotiations between netGuru and the third party. To the extent
that negotiations ended at the will of netGuru or the third party,
please explain.
Additional disclosure regarding negotiations with the third party has
been added.
6. We note your disclosure that the board members discussed the
presentations previously provided by B. Riley, as well as supplemental
information provided by B. Riley. Please expand your disclosure to
discuss how the analyses and conclusions presented by B. Riley support
the board's recommendation to security holders that the concurrent
merger and sale transactions with BPOMS and DFH are in the best
interests of netGuru and its security holders and consistent with the
board's fiduciary obligations. Also, in light of the fact that the
merger with BPOMS and the sale transaction with DFH are separate
proposals being presented to your security holders, please explain the
basis for the board's belief that it is appropriate to make a
recommendation on the merger and the sale of assets, rather than a
separate recommendation for each proposal. Similarly, revise your
disclosure to address how a fairness determination that contemplates
the merger transaction with BPOMS and the sale of assets to DFH,
together, can be relied upon in making a recommendation on each
proposal, separately.
Expanded disclosure has been provided.
Opinion of our Financial Advisor, page 78
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7. Please refer to prior comment 16. Although we note your revised
disclosure, we reissue our prior comment. In this regard, further
revise your "Selected Precedent Transactions Analysis" and your
"Comparable Public Company Analysis" to more clearly explain how the
results of these analyses support B. Riley's determination that the
Transaction is fair. For example, your disclosure should explain how
the multiples of LTM revenue determined under each analysis were
applied to conclude that the Transaction is fair to netGuru's security
Mr. Mark P. Shuman
November 2, 2006
Page 4
holders. Disclose how enterprise value to revenue multiples from
comparable companies and precedent transactions were used in the
analysis of the valuation of netGuru. Does the consideration paid in
the transaction fall within the range established by the above
referenced analyses? Also, further explain the consequences of having a
terminal value of netGuru at zero dollars and its application to the
results of the discounted cash flow analysis performed by B. Riley.
Your proxy statement should include more robust disclosure regarding
the results of the cash flow analysis and its support for B. Riley's
conclusion that the Transaction is fair.
Expanded disclosure has been provided.
8. We note your response to prior comment 17. Please expand your
disclosure to explain why obtaining a separate fairness determination
for the sale of Research Engineers to REL "would not have been useful."
Your revised disclosure should address the fact that Research Engineers
is being sold to an affiliate of the company. To the extent that the
board and/or the special committee determined that other factors
regarding the Transaction support the decision not to seek a separate
fairness determination, please disclose.
Expanded disclosure has been provided.
Interests of our Directors and Executive Officers, page 86
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9. Please revise this section to ensure that the disclosure regarding the
interests of your directors and executive officers is materially
complete. Eliminate the phrase "For example" that begins the discussion
of the employment agreements with the company's Chief Financial Officer
and Chief Operating Officer. The amounts to be received by each of the
parties referenced in this section should be specifically quantified
here. For example, but without limitation, rather than disclosing that
the salary and various other benefits under the proposed new employment
agreements include "certain increases over the salary and benefits
currently being provided to Messrs. Nelson and Dutta," please quantify
the current salaries and other benefits, as well as the increase that
is expected. Similarly, in addition to disclosing in this section the
amount of the capital stock transaction with Amrit and Santanu Das, the
outsourcing agreement and the payments associated with that agreement
should be quantified here. Readers should not have to refer to several
parts of they proxy statement to obtain complete information.
Additionally, disclose in the summary section, preferably in tabular
form, the aggregated compensation and/or benefits, including cash and
securities, to be received by each of your directors and executive
officers in connection with the merger and sale transactions. Revise to
eliminate the duplicative disclosures on pages 98 and 106 by including
appropriate cross-references. It is unclear why this section is
repeated under proposal 5, which relates to the reverse stock split.
Please advise or revise.
Additional disclosures have been added where requested. However, in the
summary section, we have provided the disclosure in narrative format rather than
in tabular form because given the varied nature of the interests, we believe the
narrative format will provide better clarity for the reader.
Mr. Mark P. Shuman
November 2, 2006
Page 5
We appreciate your and your staff's efforts to expedite the review
of our response.
Sincerely,
NETGURU, INC.
/s/ BRUCE K. NELSON
Bruce K. Nelson,
Chief Financial Officer
cc: Ms. Maryse Mills-Apenteng
Mr. Jeffrey Werbitt