A LIMITED LIABILITY PARTNERSHIP 345 PARK AVENUE TELEPHONE: 212.407.4000
INCLUDING PROFESSIONAL CORPORATIONS NEW YORK, NY 10154-0037 FACSIMILE: 212.407.4990
www.loeb.com
Direct Dial: 212-407-4827
Direct Fax: 212-214-0686
e-mail: dfischer@loeb.com
September 26, 2005
Max A. Webb,
Assistant Director
Division of Corporate Finance
Mail Stop -- 3561
Securities and Exchange Commission
Washington DC 20549-0402
Re: AVP, Inc.
Amendment No. 2 to Registration Statement on Form SB-2
File No. 333-124084
Filed July 27, 2005
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Dear Mr. Webb:
Our responses to your August 16, 2005 letter regarding the captioned
matter are numbered to correspond to the paragraph numbers of your letter, of
which a copy is enclosed.
1. We have added a risk factor as the second risk factor under Risks
Relating to Our Securities and revised Item 26 in conformity with the comment.
2. The meetings were either informal face-to-face or telephonic
meetings; they weren't recorded in any fashion.
3. We have revised the disclosure in conformity with the comment.
4. We are responding to comments under separate cover.
5. We have removed any reference to revenues being billed or
collected prior to the events.
6. We have added two tables to include 2005 contracted payment
schedule; and actual and expected cash receipts for 2005 schedule.
7. We have revised the disclosure in conformity with the comment.
AVP, Inc.
Page 2
8. We have revised our balance sheet to reflect deferred revenue
only when cash is received prior to the event(s).
9. We have revised the statement of changes in stockholders'
deficiency in conformity with the comment.
10. The increased common stock was authorized by stockholders at
AVP's August 23, 2005 meeting. Accordingly, the voting power carried by the
Series B Convertible Stock has been reduced to equal the number of shares into
which the stock is convertible (from 10 times that voting power), and the Series
A Preferred Stock was automatically converted into Common Stock. Likewise, the
Series B holders' put right has terminated. We have revised the subsequent event
footnote to update the disclosure for the approval by the stockholders.
11. We have revised the disclosure in conformity with the comment.
12. As discussed with Juan Migone on August 18, 2005, our weighted
average common shares outstanding is reflected on our statements of operations.
13. We restated our financial statements for the year ended December
31, 2003 to conform with the comment.
14. We updated the stub period financial statements to June 30, 2005
to comply with Rule 310(g) of Regulation S-B.
15. We have provided a currently dated signed consent from our
independent public accountant.
16. We are filing our opinion in conformity with the comment.
Cordially,
/s/ David C. Fischer
David C. Fischer
Enclosure
AVP, Inc.
Page 3
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20649
Mail Stop-8561
August 16, 2005
Leonard Armato
Chief Executive Officer
AVP, Inc.
6100 Center Drive, Suite 900
Los Angeles, CA 90045
Re: AVP, Inc.
Amendment No. 2 to Registration Statement on Form SB-2
File No. 333-124084
Filed July 27, 2005
Dear Mr. Armato:
W e have reviewed your filing and have the following comments. Where
indicated, we think you should revise your document in response to these
comments. If you disagree, we will consider your explanation as to why our
comment is inapplicable or a revision is unnecessary. Please be as detailed as
necessary in your explanation. In some of our comments, we may ask you to
provide us with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose of our review process is to assist
you in your compliance with the applicable disclosure requirements and to
enhance the overall disclosure in your filing. We look forward to working with
you in these respects. We welcome any questions you may have about our comments
or on any other aspect of our review. Feel free to call us at the telephone
numbers listed at the end of this letter.
General
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1. We note your response to prior comment number 1. Your analysis
leaves doubt as to the availability of the exemption you are
relying on. You should amend your registration statement to
provide appropriate disclosure in the risk factors section,
and elsewhere as appropriate, regarding the possible lack of
availability of an exemption from registration and the
attendant consequences to the company and investors_ Also
revise your disclosure in Part H, Item 26, to clarify that the
Rule 504 safe harbor is not available.
AVP, Inc.
Page 4
2. We note your response to prior comment 3 regarding your
meetings with analysts. Please send us the audio and, if
available, video recordings of these analyst meetings.
Prospectus Summary
Shares being offered for resale, page 3
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3. You appear to be offering for resale 114,248,948 shares of
common stock through this prospectus, yet the number of shares
itemized in this section totals only 105,763,213. Please
revise to account for the discrepancy,
MD&A, page 18
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4. We note you have recently located and filed your production
and distribution agreements with Fox. NBC and OLN. We will
issue comments under separate cover addressing your
confidential treatment requests with respect to these
agreements.
Revenue and Expense Recognition. page 20
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5. As discussed on the August 3, 2005 conference call, please
remove any reference to revenues being billed or collected
prior to the events.
Liquidity and Capital Resources, page 24
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6. The payment structure of your arrangements with sponsors is
critical to your cash flow. As such, please expand your
liquidity discussion for the 2005 fiscal year to disclose cash
receipts to date from these arrangements as well as the timing
of expected future cash receipts lima these contracts in a
tabular format, Additionally, you should also provide details
of the timing of expected cash payments throughout the year,
Selling Stockholders, page 37
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7. We reissue prior comment 17 with regard to Highbridge
International LLC. Where the selling securityholder is a
broker-dealer, disclose that that seller is an underwriter.
Where the selling securityholder is an affiliate of a
broker-dealer, disclose whether to the best of your knowledge
these entities purchased the securities in the ordinary
course of business and, if at the time of the purchase of the
securities to be resold, the selling securityholder had any
agreements or understandings, directly or indirectly, with
any person to distribute the securities. If you are unable to
make these assertions for any selling securityholder
identified as an affiliate of broker-dealers, then you must
identify the seller as an underwriter.
AVP, Inc.
Page 5
Balance Sheet, page F-3
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8. You are recording both receivables and deferred revenues when
you bill your customers in advance. This practice appears to
be inconsistent with GAAP and grosses up the balance sheet. As
such, please revise your filing, to reverse these
transactions, or provide us with specific accounting
literature supporting your approach.
Statement of Changes in Stockholders Equity (deficiency) page F-5
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9. We note your response to our prior comment #22_ However, we
reissue our prior comment. The historical consolidated
statement of equity of AVP should be retroactively restated
(a recapitalization) for the equivalent number of shares
received in the merger after giving effect to any differences
in par value of the issuer's and acquirer's stock with an
offset to paid in capital. As such, your statement of changes
in stockholders deficiency should reflect the equity
securities received by the accounting acquirer (AVP), from
the accounting acquiree (Othnet), as if they had bean
outstanding since the inception of AVP and rolled forward to
the beginning balance based on the ratio of shares issued to
shares acquired. Further, the outstanding shares of Othnet at
the date of acquisition should be reflected as an issuance on
the date the reverse merger transaction occurred.
Accordingly, please ensure that any changes made to the
consolidated statement of equity are reflected in your
earnings per share calculation, as necessary (i.e. changes to
the number of shares outstanding).
Subsequent Event, page F-7
- --------------------------
10. Please refer to the discussion of potential control by
holders of Series B convertible preferred stock on page 7 of
the marked copy of the proxy. You state that the holders of
these shares have agreed and given irrevocable proxies to
vote their stock in favor of the amendment so its adoption is
assured. If true, please clarify this fact in your footnotes.
Our concern is that, if additional common shares were not
authorized, holders of Series B convertible preferred stock
would have the right to sell their shares back to AVP at $3.5
million. In addition, Series A shares could not be converted
to common shares. Accordingly, if authorization of sufficient
shares is not virtually assured, your financial statements
may require revision to reflect the potential impact of these
contingencies. Please revise or advise.
11. Reference is made to page 5. We note that you are subject to a
monthly penalty if your registration statement does not become
effective by June 28, 2005. hi your updated financial
statements, please disclose the terms of the penalty and
discuss its actual and anticipated impact upon your financial
statements_
AVP, Inc.
Page 6
Pro-forma Net Loss per Common Share, page F-14
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12. We note your response to our prior comment #25. However, we
reissue our prior comment. Please disclose your calculation
of weighted average shares. Your calculation should
individually disclose the number of outstanding options,
warrants and shares issuable upon conversion of outstanding
convertible debt or preferred stock, that could potentially
dilute basic earnings per share in the future, but that were
not included in the computation of diluted earnings per share
for the periods presented in your financial statements
because their impact was anti-dilutive for the periods
presented in your financial statements_ Refer to the
requirements of paragraph 40 of SFAS No.128.
Transaction With DMC, page F-22
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13. A reorganization of entities under common control should be
accounted for in a manner similar to a pooling. The financial
statements of the separate combining enterprises for the
period of' combination and for prior years presented should
generally be restated on a combined basis. You state, in Note
1, that the financial statements have been prepared including
the net assets and results of operations of DMC "from the
transaction date" Please revise to present your financial
statements on a combined basis for all periods presented or
advise. In this regard, please note that we assume the two
entities were under common control for all periods for which
financial statements have been presented. We would not expect
the financial statements to be combined for periods prior to
the date that common control was established.
Other
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14. The financial statements should be updated, as necessary, to
comply with Rule 310 (g) of Regulation S-B. 15. In accordance
with updating the financials, please provide a currently
dated signed consent from the independent public accountant
in the amendment.
Exhibits
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16. Include your legality opinion, once you are able to file a
clean opinion, and any other outstanding exhibits with your
next amendment.
Closing
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AVP, Inc.
Page 7
As appropriate, please amend your registration statement in response to
these comments. You may wish to provide us with marked copies of the amendment
to expedite our review. Please furnish a cover letter with your amendment that
keys your responses to our comments and provides any requested supplemental
information. Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing your amendment
and responses to our comments.
AVP, Inc.
Page 8
You may Contact Juan Migone at (202) 551-3312 or Margery Reich at (202)
551-3347 if you have questions regarding comments on the financial statements
and related matters. Please contact Mathew C. Bazley at (202) 551-3382, or me,
at (202) 551-3348 with questions.
Sincerely,
Max A. Webb
Assistant Director
cc: Via Facsimile.- (212) 214-0686
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David C. Fischer
Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154