By Edgar "CORRESP"
November 2, 2005
Mr. Daniel Lee
United States Securities and Exchange Commission
Washington, D. C. 20549-0303
Re: ALLIANCE DISTRIBUTORS HOLDING INC. ("COMPANY") REGISTRATION STATEMENT ON
FORM SB-2 FILED ON OCTOBER 7, 2005 FILE NO. 333-128892
Dear Mr. Lee:
Thank you for your letter of October 31, 2005. At your request, we are
responding to each of your points with this supplemental letter. We are keying
our responses to your comments.
1. In your first comment you asked us to confirm that no selling security
holder is a registered broker-dealer other than Sunrise Securities. You
also asked us to elaborate in our disclosure on the investment-banking
services provided by Sunrise Securities and the manner in which the
compensation for the services was computed.
a. Based on the selling security holders' responses received by the
Company, Sunrise Securities is the only registered broker-dealer
security holder.
b. We have elaborated in our disclosure the investment-banking services
provided by Sunrise Securities and the manner in which the
compensation for the services was computed. Footnote 12 to the
selling security holders table states, in part, "In December 2003,
Essential Reality, Inc. ("Essential"), the predecessor of the
Company, signed an Investment Banking Agreement with Sunrise
Securities Corp. ("Sunrise"), a registered broker dealer. Sunrise
was to raise approximately $1,500,000 to $3,500,000 from the sale of
Essential's securities in a private placement offering ("PPO"), as
more fully described below in Note 1 to the Company's financial
statements. Essential agreed to issue to Sunrise, upon the closing
of each financing, shares of Common Stock and Warrants in amounts
equal to eleven percent (11%) and ten percent (10%), respectively,
of the aggregate number of fully diluted and/or converted shares of
Common Stock and/or Common Stock equivalents that were purchased by
investors. Sunrise received (a) an $8,500 nonrefundable retainer
fee; and (b) 108,146 shares of the Series A 6% Convertible Non
Redeemable Preferred Stock ("Series A Preferred Stock") (11% of
shares of Common Stock equivalents sold in the private placement
($3,500,000/$3.56*.11)) and 5 year warrants ("Warrants") due June
29, 2009 to purchase 1,564,096 shares of common stock at an exercise
price of $.22 on a post reverse split basis (68,820,224 shares of
common stock on a pre-reverse split basis (10% of shares of Common
Stock equivalent sold in the private placement
($3,500,000/$3.56)*.10*700) for an exercise price of $0.005). The
PPO price of each share of Series A Preferred Stock was $3.56 and,
entitled the holder of such Series A Preferred Stock to receive,
upon conversion, 700 shares of Common Stock of the Company."
2. In your second comment you asked us to confirm that no selling security
holder is an affiliate of a registered broker-dealer other than Smithfield
Fiduciary and Rosenthal & Rosenthal. You also asked us to expand the
prospectus disclosure to indicate whether such selling stockholders
acquired the securities to be sold in the ordinary course of business, and
to indicate whether at the time of acquisition such selling security
holders had any agreements, understandings or arrangements with any other
person, either directly or indirectly, to dispose of such a securities.
a. Based on the selling security holders' responses received by the
Company, the following footnotes to the selling security holders
table identify all of the selling security holders that are
affiliates of a registered broker dealer and provide the requested
disclosures for each such selling security holder:
Page 1 of 2
i. Footnote 12 discloses, in part, that "Sunrise Securities Corp.
distributed the compensation shares to the following
affiliates, each of whom advised that he/she received such
compensation shares in the ordinary course of business for
his/her own account, and, at the time of receipt of the
compensation shares, had no agreements or understandings with
any person, directly or indirectly, to further distribute the
securities: Derek Caldwell, Nathan Low, Sunrise Foundation
Trust, Amnon Mandelbaum, David Goodfriend, Richard Stone and
Marcia Kucher."
ii. Footnote 14 discloses that "Smithfield Fiduciary LLC is an
affiliate of Highbridge Capital Corporation, a registered
broker-dealer. The securities were acquired in the ordinary
course of business and, at the time of the purchase of such
securities to be resold under the registration statement,
Smithfield Fiduciary LLC did not have any agreements, plans or
understandings, directly or indirectly, with any person to
distribute the securities."
iii. Footnote 33 discloses that "Rosenthal & Rosenthal, Inc. is an
affiliate of Rosenthal International Limited, a registered
broker-dealer. The securities were acquired in the ordinary
course of business and, at the time of the purchase of such
securities to be resold under the registration statement,
Rosenthal & Rosenthal, Inc. did not have any agreements, plans
or understandings, directly or indirectly, with any person to
distribute the securities."
iv. Footnote 46 discloses that "The Ezra Charitable Trust is an
affiliate of Pond Equities, a registered broker dealer. The
Ezra Charitable Trust acquired the securities in the ordinary
course of business and, at the time of the purchase of such
securities, had no agreements, plans or understandings,
directly or indirectly, with any person to distribute such
securities."
3. In your third comment you asked us to disclose the natural persons who
exercise the voting and/or dispositive power with respect to the
securities to be offered for resale by the selling security holders that
are non-reporting entities. You specifically request that such information
be provided for Theseus Fund.
a. The footnotes to the selling security holder table disclose the
natural persons who exercise the voting and/or dispositive power
with respect to the securities to be offered for resale by the
selling security holders that are non-reporting entities.
b. Footnote 39 discloses that "Theseus Fund, LP ("Fund"), formerly
known as Minotaur Fund LLP, is a registered investment company.
Corfman Capital, Inc.("IA") controls the Fund by virtue of its
position as the sole general partner of the Fund. Jim Corfman is the
sole shareholder of IA and has sole dispositive and investment power
in the Fund."
4. In your fourth comment you ask to have counsel opine, in Exhibit 5.1, on
the legality of the common stock to be issued upon conversion of the
Series A Preferred Shares.
a. Counsel will opine on the legality of the common stock to be issued
upon conversion of the Series A Preferred Shares.
5. In your fifth comment you ask us to identify, in the signatory page, the
person signing in the capacity of the controller or principal accounting
officer or, otherwise, have the Company's controller or principal
accounting officer execute the registration statement.
a. Barbara Ras has been identified as the person signing in the
capacity of principal accounting officer.
Sincerely,
/s/ Jay Gelman
-----------------------
Jay Gelman
Chief Executive Officer
Page 2 of 2