January 31, 2005
H. Christopher Owings, Esq.
Assistant Director
Office of Small Business
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: CATALYST LIGHTING GROUP, INC.
REGISTRATION STATEMENT ON FORM SB-2
FILED ON DECEMBER 10, 2004
FILE NO. 333-118255
Dear Mr. Owings:
This letter is in response to the comments contained in the Staff's letter
to Dennis H. Depenbusch (the "Comment Letter") dated January 7, 2005. The
responses below correspond to the numbered comments contained in the Comment
Letter. Capitalized terms not otherwise defined herein have their respective
meanings as set forth in the Registration Statement.
GENERAL
1. We note the disclosure in Item 1.01 of the Form 8-K filed on October 5,
2004. It is unclear whether you are registering common stock issuable upon
conversion of the secured convertible term note described in that Form
8-K. If you are registering those shares please clarify your disclosure
and supplementaly provide your analysis as to why that transaction with
the Laurus Master Fund, Ltd. is a completed private placement. In order to
have a completed private placement the investor must be irrevocably
committed to purchase the securities and will not make any further
investment decision. We note you disclosure in the Form 8-K in the section
referenced above that Laurus has "sole and absolute" control of the funds
in the escrow account. Therefor, it is unclear whether Laurus Master Fund
is irrevocably committed since its controls the funds held in the
restricted account
WE HAVE MADE THE REQUESTED CHANGE IN THE REVISED SB-2 FILED CONCURRENTLY WITH
THIS LETTER, MODIFYING THE SB-2 TO EXCLUDE COMMON STOCK ISSUABLE UPON CONVERSION
OF THE SECURED CONVERTIBLE TERM NOTE.
2. Please revise throughout the prospectus to clarify what common stock is
being registered. For instance, what shares of Keating Securities, LLC are
being registered? Also, in the fee table please clearly identify what
shares of common stock are issuable upon the conversion of notes or the
exercise of warrants and options. Currently, the fee table lists three
categories but does not provide any footnote disclosure clarifying what
shares are being registered
WE HAVE MADE THE REQUESTED CHANGE IN THE REVISED SB-2 FILED CONCURRENTLY WITH
THIS LETTER.
3. Please expand your disclosure throughout your prospectus to describe the
transactions in which the shares, debentures and warrants were issued and
the material terms of those financial instruments. The disclosure in your
Prospectus Summary and on the top of page 43 does not seem to clearly and
concisely convey the material terms of the securities which are
convertible and exercisable into the shares being registered. Material
terms such as the conversion limitations described in Exhibits 10.2, 10.7,
and 10.8 as filed with the Form 8-K on October 5, 2004 should be
disclosed. We also note the limitations in the terms of the notes that
prohibits paying dividends. Also, your disclosure should be clear as to
the number of shares that are being registered that relate to warrants,
options, or other financial instruments. If true, you should also clarify
that your financial instruments have fixed conversion prices.
WE HAVE MADE THE REQUESTED CHANGE IN THE REVISED SB-2 FILED CONCURRENTLY WITH
THIS LETTER.
4. We note that you are registering common stock and common stock underlying
warrants that were issued as part of units in an October 12, 2004 private
placement. Your disclosure in the Prospectus Summary on page 6 indicated
that this private placement has been "extended through January 24, 2005"
Please provide an analysis as to whether the October 12, 2004 sale has
been completed, enabling you to register those shares for resale here. As
indicated above, are the purchasers irrevocably committed to purchase the
securities and will not make any further investment decision?
WE BELIEVE THE OCTOBER 12, 2004 CLOSING REPRESENTS A COMPLETED SALE, AS THE
INVESTOR IRREVOCABLY COMMITTED TO PURCHASE THE SECURITIES AND CANNOT MAKE ANY
FURTHER INVESTMENT DECISION. IN FACT, THE FIRST CLOSING ON THIS PRIVATE
PLACEMENT HAS ALREADY OCCURRED, CATALYST HAS RECEIVED THE FUNDS REPRESENTING THE
PURCHASE PRICE THEREFOR AND THE SHARES OF COMMON STOCK AND COMMON STOCK PURCHASE
WARRANTS ISSUABLE TO SUCH INVESTOR HAVE ALREADY BEEN ISSUED.
RISK FACTORS
5. If true, please add a risk factor indicating that Laurus may gain control
of the Company by converting the notes it holds, or in connection with any
other arrangement with you.
LAURUS MAY NOT GAIN CONTROL OF THE COMPANY BY CONVERTING THE NOTES OR WARRANTS
IT HOLDS OR THROUGH ANY OTHER ARRANGEMENT. UNDER THE TERMS OF THE LOAN
DOCUMENTS, LAURUS IS CONTRACTUALLY PROHIBITED FROM CONVERTING ANY AMOUNTS INTO
COMMON STOCK OF CATALYST IF SUCH CONVERSION WILL RESULT IN LAURUS HOLDING MORE
THAN 4.99% OF THE OUTSTANDING SHARES OF CATALYST COMMON STOCK.
The Existence of Outstanding Options and Warrants May Harm Our..., page 15
6. It is unclear why this dilution risk factor is limited to only options and
warrants. Specifically, why do you not address the significant dilution
that may occur in connection with the approximately 5 million shares you
are offering in this registration. We note that you have less that 4
million shares currently outstanding. Please revise or advise.
WE HAVE MADE THE REQUESTED CHANGE IN THE REVISED SB-2 FILED CONCURRENTLY WITH
THIS LETTER.
Management's Discussion and analysis and Plan of Operation, page 18
7. Please expand this section to include a discussion of the Laurus
transaction and other material private placement of notes and warrants.
Where applicable, discuss the impact on your liquidity. Including only a
Subsequent Events subsection does not adequately present an integrated
picture of your financial condition. A prospectus speaks as of the date of
effectiveness. Thus, we do not believe it is appropriate to provide a
Subsequent Events subsection relating to the securities being offered in
the Prospectus.
WE HAVE MADE THE REQUESTED CHANGE IN THE REVISED SB-2 FILED CONCURRENTLY WITH
THIS LETTER.
Principal Stockholders, page 38
8. Please disclose the total number of shares upon which the table of
beneficial ownership is based. In this regard, please tell us whether that
figure includes the shares being registered in this offering. If not, why
not?
WE HAVE MADE THE REQUESTED CHANGE IN THE REVISED SB-2 FILED CONCURRENTLY WITH
THIS LETTER. THE TABLE IS BASED ON THE 3,789,384 CURRENTLY ISSUED AND
OUTSTANDING SHARES OF COMMON STOCK AND WAS INCREASED FOR CERTAIN PERSONS, AS
NECESSARY, TO REFLECT SHARES OF COMMON STOCK BENEFICIALLY OWNED BY THAT PERSON
WHICH ARE ISSUABLE UPON CONVERSION OR EXERCISE OF OPTIONS OR WARRANTS HELD BY
THAT PERSON. THE TABLE DOES NOT INCLUDE SHARES OF COMMON STOCK BEING REGISTERED
HEREUNDER FOR WHICH THE HOLDER IS NOT, AS OF THE DATE HEREOF, DEEMED TO BE THE
BENEFICIAL OWNER. FOR EXAMPLE, LAURUS IS DEEMED TO BE THE BENEFICIAL OWNER OF
572,000 SHARES OF COMMON STOCK AS OF THE DATE HEREOF, AS 472,000 OF THE COMMON
STOCK PURCHASE WARRANTS ISSUED TO LAURUS ARE EXERCISABLE ANY TIME FROM THE DATE
HEREOF THROUGH SEPTEMBER 30, 2009 AND THE REMAINING 100,000 COMMON STOCK
PURCHASE WARRANTS ISSUED TO LAURUS ARE EXERCISABLE ANY TIME THROUGH DECEMBER 3,
2009. HOWEVER, THE SHARES OF COMMON STOCK UNDERLYING THE NOTES ARE NOT ISSUABLE
UNTIL (A) MONEY HAS BEEN ADVANCED PURSUANT TO ANY OF THE NOTES AND (B) THE
SHARES OF COMMON STOCK UNDERLYING THE NOTES HAVE BEEN REGISTERED FOR RE-SALE OR
ARE EXEMPT FROM THE REGISTRATION REQUIREMENTS. ACCORDINGLY, THEY HAVE NOT BEEN
INCLUDED IN THE CALCULATION OF THE TOTAL NUMBER OF SHARES UPON WHICH THE TABLE
OF BENEFICIAL OWNERSHIP IS BASED.
Selling Shareholders, pages 39-40
9. Please identify the individuals with voting or investment control of the
securities listed for the entities in the table.
WE HAVE MADE THE REQUESTED CHANGE IN THE REVISED SB-2 FILED CONCURRENTLY WITH
THIS LETTER.
10. Is any selling shareholder a broker-dealer? If so, identify that
stockholder as an "underwriter" within the meaning of the Securities Act
of 1933. You should also revise the Manner of Sale section to state the
names of the selling shareholders who are broker-dealers, and to state
that they are also underwriters with respect to the shares that they are
offering for resale.
WE HAVE MADE THE REQUESTED CHANGE IN THE REVISED SB-2 FILED CONCURRENTLY WITH
THIS LETTER.
11. If a selling shareholder is an affiliate of a broker-dealer, disclose if
true that:
o The selling shareholder purchased the shares in the ordinary course
of business, and
o At the time of the purchase of the securities to be resold, the
seller had no agreements or understandings, directly or indirectly,
with any person to distribute them.
If these statements are not true for any selling shareholder, then the
prospectus must state that the selling shareholder is an underwriter.
WE HAVE MADE THE REQUESTED CHANGE IN THE REVISED SB-2 FILED CONCURRENTLY WITH
THIS LETTER.
12. Please tell us whether your director Kevin Keating is affiliated with
Keating Securities, LLC. If so, this material relationship should be
described as required by Item 507 of Regulation S-B.
KEVIN KEATING AND KEATING SECURITIES, LLC HAVE EACH CONFIRMED TO THE COMPANY
THAT KEVIN KEATING IS NOT AFFILIATED WITH KEATING SECURITIES, LLC OR ANY OF ITS
AFFILIATES, SUBSIDIARIES OR RELATED ENTITIES.
13. We note the entities listed with shares issuable upon the exercise of
options and warrants. In a footnote, please separately identify the number
of shares issuable upon the conversion of options and those issuable upon
the conversion of warrants. Also, specify the exercise price.
WE HAVE MADE THE REQUESTED CHANGE IN THE REVISED SB-2 FILED CONCURRENTLY WITH
THIS LETTER.
Manner of Sale, page 41
14. We note the last paragraph in this section on page 41. Please provide the
disclosure required by Item 508(i) and (j) of Regulation S-B and otherwise
clarify the disclosure regarding Regulation M. Also, it is unclear why you
state that Whitco has "advised the selling shareholders" in the last
paragraph in this section on page 41 when Catalyst seems to be the issuer
of the securities. Please revise or advise.
WE HAVE MADE THE REQUESTED CHANGE IN THE REVISED SB-2 FILED CONCURRENTLY WITH
THIS LETTER, INCLUDING CHANGING WHITCO TO CATALYST, AS IT SHOULD HAVE BEEN
ORIGINALLY.
If you have any questions regarding our responses to any of the above
information, please contact David N. Feldman at (212) 869-7000.
Sincerely,
Catalyst Lighting Group, Inc.
By: /s/ Dennis H. Depenbusch
-----------------------
Dennis H. Depenbusch
Chief Executive Officer
cc: Brian Mandell-Rice
David N. Feldman, Esq.