TELIPHONE CORP [teliPhone LOGO]
November 27, 2006, amended December 13, 2006
VIA EDGAR
John Reynolds
Assistant Director
United States Securities and Exchange Commission
Division of Corporate Finance
Mail Stop 3561
Washington, D.C., 20549
File No. 333-136993
Re: Teliphone Corp. comment letter dated October 11, 2006
Amended to update to included audited financial statements of September 30,
2006.
Dear Mr. Reynolds,
We have reviewed your letter dated October 11, 2006 concerning the following
comments. Under each comment we have responded and have provided additional
information to bring about a resolution of these matters. At any time we would
welcome you contacting us concerning any of the additional information or our
interpretations of the information.
General
1. Please include the correct Commission file number. You have used the
number of another registrant.
RESPONSE
We have noted this comment and revised the disclosure to reflect the correct
Commission file number as 333-136993.
2. Please reconcile the disclosure regarding your state of
incorporation. The legality opinion and some of the other disclosure
concerning the jurisdiction of incorporation represent that Delaware
is your state of incorporation. However, the cover page of the
registration statement indicates it is Nevada.
RESPONSE
We have noted this comment and revised the disclosure to reflect that we are
incorporated in Nevada.
3. We note that the cover page of the prospectus does not include
selling shareholders and that the prospectus does not include the
disclosure required under Item 507 of Regulation S-B. However, the
disclosure in the "Plan of Distribution" section and the risk factor
under the subheading "There is no public trading market..."
discusses selling shareholders. Please reconcile and revise
accordingly. We may have further comment.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
1
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
We have noted this comment and revised our heading and subsequent disclosure on
our Plan of Distribution.
4. If this offering includes stock underlying warrants, it is necessary
to disclose on the cover page and wherever else as appropriate. In
addition, it is also necessary to reconcile the disclosure
throughout the prospectus in this regard. We note that your first
discussion of warrants is on page 22 of the "Plan of Distribution",
where you state that you will receive proceeds only upon exercise of
the outstanding common stock purchase warrant. However, on page 2
and page 27 under "Warrants", you disclose that you have no
outstanding warrants. Please revise accordingly.
RESPONSE
We have noted this comment and revised our disclosure to delete any reference to
the sale of warrants. We are not offering any warrants in this offering.
5. Confirm, if true, that counsel is acting within all rules and
procedures applicable to both counsel and the company in serving as
the escrow agent in this matter. Also, describe the steps counsel
has taken to ensure that the monies of the offering will not be
commingled with any other funds of either counsel or the company.
RESPONSE
Counsel is aware of the procedures applicable to both counsel and the Company.
All funds shall be held in an attorney trust account ("IOLTA," an attorneys
trust account in compliance Rules Regulating Trust Accounts as adopted by the
Supreme Court of Florida) established with Wachovia Bank. This is a non-interest
bearing account. The Plan of Distribution was revised to reflect the procedures
required to subscribe to this offering.
6. Please include page numbers in the financial statements section of
the filing.
RESPONSE
Page numbers will be added to the amended filing.
Front Page of the Registration Statement
7. Please include the registrant's address on the front page of the
registration statement.
RESPONSE
We have noted this comment and revised our disclosure to include our address on
the front page.
8. We note the statement that, "The most recent price paid for our
common stock in a private placement was $0.50." Please include the
date of the private placement and include the transaction in Part
II, Item 26 of the registration statement.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
2
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
We have noted this comment and revised our disclosure to include the date of the
August 11, 2005 private placement. In addition, the transaction was included
under Item 26.
Cover Page
9. Please highlight the risk factor cross-reference by prominent type
or in another manner.
RESPONSE
We have noted this comment and revised our disclosure to include a prominent
reference to the risk factors.
10. Please remove the following from the cover page of the prospectus,
as pursuant to Item 501 of Regulations S-B: "The offering price may
not reflect the price of our shares after the offering".
RESPONSE
We have noted this comment and revised our disclosure accordingly.
11. Please reconcile the last sentence before the table with the table
regarding commissions. Please affirmatively state whether the
company plans to sell the securities through a broker/dealer. Also,
remove footnote 3 or explain why it should not be removed. If you do
not remove it, please indicate which part of the text it is
referencing by the use of the footnote indicator.
RESPONSE
We have noted this comment and revised our disclosure to delete any references
to a broker/dealer as the Company does not plan to sell the securities through a
broker/dealer.
Prospectus Summary, page 1
About our Company, page 1
12. Disclose the telephone number of the principal executive offices.
RESPONSE
We have noted this comment and revised our disclosure to include the telephone
number of the principal executive offices is (514) 313-6010.
13. Please include the name of the company at the time of incorporation
in 1999.
RESPONSE
We have noted this comment and revised our disclosure to include the name of the
Company at the time of incorporation in 1999.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
3
TELIPHONE CORP [teliPhone LOGO]
14. Please disclose the date in which the company began its operations
as a telecommunications company.
RESPONSE
The company began its operations as a telecommunications company in April of
2005. We have noted this comment and revised our disclosure as follows:
Teliphone Corp. was incorporated in 1999 with the name "OSK Capital
II Corp." under the laws of the State of Nevada. Our principal
executive offices are located at 4150 Ste-Catherine Street West,
Westmount (Montreal) Quebec Canada H3Z 0A1. Our US Corporate and
legal affairs office is located at 1224 Washington Avenue, Miami,
Florida, 33139. The telephone number of our principal executive
office is (514) 313-6010. Our general telephone number is (514)
313-6000. The address of our website is http://www.teliphone.us.
Teliphone Corp. ("The Company" or "Teliphone") became a
telecommunications company in April 2005 upon the merger and
re-organization with Teliphone Inc., a Canadian provider of
broadband telephone services founded in August 2004. Broadband
telephone services utilize our innovative Voice over Internet
Protocol, or VoIP, technology platform, to offer feature-rich,
low-cost communications services to our customers, thus providing
them an experience similar to traditional telephone services at a
reduced cost. VoIP means that the technology used to send data over
the Internet (example, an e-mail or web site page display) is used
to transmit voice as well. The technology is known as packet
switching. Instead of establishing a dedicated connection between
two devices (computers, telephones, etc.) and sending the message
"in one piece," this technology divides the message into smaller
fragments, called 'packets'. These packets are transmitted
separately over the internet and when they reach the final
destination, they are reassembled into the original message.
We principally sell these VoIP services to residential and small
business customer users. Our current geographic market is
predominantly the Province of Quebec, Canada.
As a result of the merger and re-organization, Teliphone Inc. became
a wholly-owned subsidiary of our company. On July 14th, 2006, we
entered into a letter of intent with 3901823 Canada Inc. where
3901823 Canada Inc. becomes a minority shareholder of our subsidiary
Teliphone Inc. As a result of this letter of Intent, Teliphone Inc.
remains a majority-owned subsidiary of our company.
As a result of the merger and re-organization, we became a majority
owned subsidiary of Teliphone Inc.'s parent company, United American
Corporation, a Florida Corporation trading on the NASD OTCBB under
the symbol UAMA. On October 30, 2006, United American Corporation
spun-off our Company by distributing its entire holding of
25,737,785 shares of the common stock of our company to its
shareholders on a pro rata basis.
15. Please explain the phrase "next generation internet based telephony
and mobile telephony communications."
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
4
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
We have noted this comment and revised our disclosure to delete the phrase "next
generation internet based telephony and mobile telephony communications."
Instead, we have used the Company Summary information as described in Comment
Response #14 herein.
16. Please provide a reasonable basis for the statement "high growth
market segment effective" or remove.
RESPONSE
We have noted this comment and revised our disclosure to delete to statement.
17. Throughout the prospectus please clarify, expand and update the
disclosure regarding the spin-off that you reference. Provide all
relevant dates.
RESPONSE
We have noted this comment and revised our disclosure to include the Spin-Off of
our Company from our parent United American Corporation, which has been approved
by Shareholders and completed on October 30, 2006. We have clarified this in the
re-writing of our Company Summary, which is found in its entirety in Comment
Response #14 herein.
18. We note the disclosure here and throughout the prospectus that,
"Teliphone is focused on the development and marketing of Voice
Internet Protocol (VoIP) solutions." Please explain the term Voice
Internet Protocol in more detail.
RESPONSE
We have noted this comment and revised our disclosure to include the following
description of "Voice over Internet Protocol" (VoIP):
"Voice over Internet Protocol" (VoIP) means that the technology used to send
data over the Internet is now being used to transmit voice as well. The
technology is known as packet switching. Instead of establishing a dedicated
connection between two devices (computers, telephones, etc.) and sending the
message "in one piece," this technology divides the message into smaller
fragments, called 'packets'. These packets are transmitted separately over a
decentralized network and when they reach the final destination, they're
reassembled into the original message.
19. At the end of the fourth paragraph of this section you reference
"various carrier agreements, telecommunications services agreements
with wireless internet access providers and various retail and
distribution agreements." Please ensure that you describe the
principal terms of each material contract in the business section
and that you file each agreement as an exhibit.
RESPONSE
We have noted this comment and revised our disclosure to delete this detailed
description of our Company and the agreements that it has in the Summary section
entirely. A more complete description of the Company and its operations is now
located in the Description of Business Section. We have updated the disclosure
to describe the principal terms of each material contract and have filed each
agreement as an exhibit in the amended filing.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
5
TELIPHONE CORP [teliPhone LOGO]
The Offering, page 2
20. Please reconcile the following two statements, the first from this
section and the second from page 22 the "Plan of Distribution"
section:
o "There are currently no options to purchase shares of common
stock outstanding as of August 18, 2006 and there are no
additional shares of common stock available for future
issuance under our stock option plans and there are no
outstanding warrants to purchase additional shares of common
stock"; and
o "We will receive none of the proceeds from the sale of the
shares of common stock by the Selling Shareholders, except
upon exercise of the outstanding common stock purchase
warrant"
RESPONSE
We have noted this comment and revised our Plan of Distribution to include
Selling Shareholders. There are no options or warrants issued at this time.
Summary Financial Data, page 2
21. Please revise your table to ensure all data agrees to your financial
statements included in your filing. For example, balance sheet data
at June 30, 2006 does not agree to the June 30, 2006 balance sheet
included in your filing.
RESPONSE
We have noted this comment and revised the disclosure to ensure all data agrees
to your financial statements included in your filing.
Amendment- We have updated for all financial statements to refer to the audited
financials of September 30, 2006 and September 30, 2005.
Risk Factors, page 5
22. In the first paragraph, you state that, "our most significant risks
and uncertainties are described below; however, they are not the
only risks we face." Please revise to disclose that you discussed
all of the material risks.
RESPONSE
We have noted this comment and revised the disclosure to eliminate the following
sentence: 'however, they are not the only risks we face'.
23. Please avoid the generic conclusion you reach in some of your risk
factors that the risk "could negatively affect us" (in the risk
factor "Because of our potential success...") and "could have a
negative effect on our business" (in the risk factor "Future new
technologies..."). Instead, replace this type of language in the
risk factors with specific disclosure of how your business and
operations would be affected.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
6
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
We have noted this comment and revised our risk factors accordingly.
24. Please revise your risk factor subheadings to state the material
risk to potential investors. In this regard, your headings should
disclose the consequences to the investor or to the company, should
the risk materialize. For example, some of your subheadings merely
state facts or describe uncertainties and do not adequately reflect
the risks that follow. Please revise your subheadings to state
succinctly the risks. In addition, please revise the risk factor
narratives to state succinctly the risks and only those risks
disclosed in the subheadings.
RESPONSE
We have noted this comment and revised our risk factors accordingly.
25. Please highlight the risk factor subheadings through numbering, bold
type, underlining or in another clear manner.
RESPONSE
We have noted this comment and revised our risk factors accordingly.
Risks Related to Our Financial Condition, page 5
"We have Limited Operating History..." page 5
26. With regard to your first risk factor, please reconcile the amount
presented as your net loss since inception to June 30, 2006 of
$653,631 with your accumulated deficit of $978,937 presented on your
June 30, 2006 balance sheet.
RESPONSE
We have noted this comment and revised our accumulated deficit to reflect
$978,937 representing the correct value for the net loss since inception to June
30, 2006.
Amendment- we have incurred a net loss since inception to September 30, 2006 of
$1,414,778.
27. Based on the disclosure in Note 2 to your audited financial
statements, you emerged from the development stage with the reverse
acquisition with OSK Capital II in April 2005. In risk factor one,
please remove the description "development stage telecommunications
company."
RESPONSE
We have noted this comment and revised to delete the reference to development
stage telecommunications company.
28. In risk factor one, please reconcile the amount presented as losses
from inception ($653,631) to the accumulated deficit on your balance
sheet.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
7
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
We have noted this comment and revised our accumulated deficit to reflect
$978,937 representing the correct value for the net loss since inception to June
30, 2006.
29. We note the statement in risk factor one that, "These losses have
resulted principally from costs incurred in our research and
development programs and from our general and administrative costs."
Please reconcile this statement with the disclosures in the
financial statements for the year ended September 30, 2005 in which
the company's had a loss after costs of revenues of $264,499. Please
compare the costs of revenues with the operating revenues.
RESPONSE
We have noted this comment and revised our disclosure to reflect that the
Company had a net loss of ($691,390) for the year ended September 30, 2005.
Amendment- The Company had a net loss of ($668,374) for the year ended September
30, 2006.
"We Require Additional Financing..." page 6
30. We note the statement in risk factor two that "We currently do not
have any commitments or arrangement to obtain any such funds of that
which is being provided by our parent company." Please reconcile
this statement with the fact that the company is raising funds in
this offering. Also discuss the effect that the spin-off will have
on the company's ability to receive funding from its parent company
after completion of the spin-off.
RESPONSE
We have noted this comment and revised our disclosure as follows:
We Require Additional Financing to Sustain Our Operations
Based on our current operating plan, if the maximum number of shares are sold we
should have sufficient funds to satisfy our anticipated need for working capital
and capital expenditures for the next 12 months We will require funds to sustain
operations and to develop our business. In order to cover our continued losses
from operations, we require at least 4,000 active, paying customers. We have
achieved just over 35% of this target. We will require continued financing to
sustain this shortfall until we reach our break-even point. Financing is
likewise necessary to achieve our optimum growth.
In selling only the minimum number of shares, this results in insufficient
proceeds for operations. Until October 30, 2006, our financing shortfall had
been covered by our parent company, United American Corporation. This was in the
form of cash advances received on an "as needed basis" based on our agreement
dated February 23, 2006. The funds advanced have been converted to common stock
of our Company at a value of $0.25 per share.
From October 31, 2006 to the point at which we are able to obtain funds through
the sale of shares associated with this offering, we will continue to receive
cash advances on an 'as needed basis' from our former parent company United
American Corp. These funds will have to be re-paid by the Company, are
non-interest bearing and are not anticipated to exceed $150,000.
There can be no assurance that any additional funds will be available to us upon
terms acceptable to us or at all. If we are unable to obtain additional
financing we might be required to delay, scale back, or eliminate certain
aspects of our research and product development programs or operations. Should
the financing we require to sustain our working capital needs be unavailable or
prohibitively expensive, the consequences would be a material adverse effect on
our business, operating results, financial condition and prospects.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
8
TELIPHONE CORP [teliPhone LOGO]
31. In risk factor two, please clearly disclose whether the company has
outstanding warrants or stock options.
RESPONSE
We have noted this comment and revised our disclosure to state that the company
has no outstanding warrants or stock options.
Risks Related to Our Business, page 6
"Decreasing telecommunications prices..." page 6
32. Please explain "domestic and international telecommunications
prices."
RESPONSE
We have noted this comment and revised our disclosure further clarify this risk
associated to our business as follows:
"Decreasing market prices for our products and services may cause us
to lower our prices to remain competitive, which could delay or
prevent our future profitability"
We have also modified our wording for "domestic and international
telecommunications prices" and replaced this description with the following
sentence:
"Currently, our prices are lower than those of many of our
competitors for comparable services. However, market prices for
local calling and international long distance calling have decreased
significantly over the last few years, and we anticipate that prices
will continue to decrease."
"If VoIP technology fails..." page 6
33. Please provide the basis of the third and fourth sentences of this
risk factor
RESPONSE
We have noted this comment and revised our disclosure further clarify this risk
to include the following:
"Revenue generated from sales to residential customers will continue
to account for most of our revenue for the balance of 2006. We
anticipate that in 2007, international wholesale will become the
more significant revenue generating activity for our Company."
Upon further review, we believe that these sentences do not offer any meaningful
value to our disclosure and therefore they have been removed in the amended
filing.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
9
TELIPHONE CORP [teliPhone LOGO]
34. We note that most of the disclosure on pages 7-8 is long and
technical. Some of the information could be discussed in other parts
of the prospectus, such as the business section. Please revise this
risk factor and other similar risk factors accordingly.
RESPONSE
We have noted this comment and revised our disclosure further clarify this risk
to include the following:
B.3. Certain aspects of our service are not the same as traditional
telephone service, which may limit the acceptance of our services by
mainstream consumers and our potential for growth.
Certain aspects of our service are not the same as traditional
wireline telephone service. Our continued growth is dependent on the
adoption of our services by mainstream customers, so these
differences are becoming increasingly important. For example:
o Our customers may experience lower call quality than they are used
to from traditional wireline telephone companies, including static,
echoes, dropped calls and delays in transmissions;
o In the event of a power loss or Internet access interruption
experienced by a customer, our service is interrupted. Unlike some
of our competitors, we have not installed batteries at customer
premises to provide emergency power for our customers' equipment if
they lose power, although we do have backup power systems for our
network equipment and service platform.
o Our emergency and new E-911 calling services are different from
those offered by traditional wireline telephone companies and may
expose us to significant liability.
"Flaws in our technology and systems..." page 8
35. We note the disclosure to "our technology" and "our network". Please
revise to explain the company's ownership interests in such
properties.
RESPONSE
We have noted this comment and revised our disclosure further clarify this risk
to include the following:
Our Company has invested in the research and development of our VoIP
telecommunications technology which permits the control, forwarding,
storing and billing of phone calls made or received by our
customers. This technology has been developed by our employees and
consultants and is owned entirely by our Company. The calls are
transmitted over our network to the Public Switched Telephone
Network (PSTN), that is, the traditional wireline network that links
all telephone devices around the world. Our network consists of
leased bandwidth from numerous telecommunications and internet
service providers. Bandwidth is defined as the passage of the call
over the internet. The configuration of our technology together with
this leased bandwidth and the telecommunications and computer
hardware required for our services to function is proprietary to our
company. We do not own any fibre optic cabling or other types of
physical data and voice transmission links, we lease dedicated
capacity from our suppliers.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
10
TELIPHONE CORP [teliPhone LOGO]
"As a result of being a public company..." page 9
36. It appears that this risk factor could apply to any issuer. Please
revise to explain how the risk factor specifically applies to your
company or remove.
RESPONSE
We have noted this comment and removed this risk factor.
"Because much of our potential success and value lies..." page 9
37. Please explain the pending patent applications and identify the
owner of each of the patent applications which you reference. Also,
state the application number of each.
RESPONSE
We have noted this comment and revised our disclosure to clarify that the
company does not hold any patents or pending patent applications. The disclosure
has been clarified as follows:
Our ability to compete effectively is dependent in large part upon
the maintenance and protection of internally developed systems and
software. We cannot patent much of the technology that is important
to our business. To date, we have relied on confidentiality
procedures and licensing arrangements, to establish and protect our
rights to our technology. We typically enter into confidentiality or
license agreements with our employees, consultants, customers and
vendors in an effort to control access to, and distribution of,
technology, software, documentation and other information. Despite
these precautions, it may be possible for a third party to copy or
otherwise obtain and use this technology without authorization.
Risks related to Regulation, page 10
"The success of our business relies..." page 11
38. Provide more detailed disclosure regarding whether suppliers of
broadband Internet access have a legal obligation to allow their
customers to access and use their service without interference.
RESPONSE
We have noted this comment and revised our disclosure to include more detailed
disclosure regarding whether suppliers of broadband Internet access have a legal
obligation to allow their customers to access and use their service without
interference. The disclosure has been clarified as follows:
Our customers must have broadband access to the Internet in order to
use our service. In the case of the Canadian market, our principal
market, the Canadian Radio-Television Telecommunications Commission
(CRTC) has ordered that Internet Service Providers and Incumbent
Exchange Carriers have a legal obligation as per Order 2000-789 to
provide their services without interference to other service
providers in conjunction with to section 27(2) of the
Telecommunications Act.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
11
TELIPHONE CORP [teliPhone LOGO]
However, anti-competitive behaviour in our market can still occur.
For example, a Canadian cable provider recently began offering an
optional Cdn$10 per month "quality of service premium" to customers
who use third-party VoIP services over its facilities. However,
customers who purchase VoIP services directly from this cable
provider are not required to pay this additional fee. Based on this
example, some providers of broadband access may take measures that
affect their customers' ability to use our service, such as
degrading the quality of the data packets we transmit over their
lines, giving those packets low priority, giving other packets
higher priority than ours, blocking our packets entirely, or
attempting to charge their customers more for also using our
services.
It is not clear whether suppliers of broadband Internet access have
a legal obligation to allow their customers to access and use our
service without interference in the US. As a result of recent
decisions by the U.S. Supreme Court and the FCC, providers of
broadband services are subject to relatively light regulation by the
FCC. Consequently, federal and state regulators might not prohibit
broadband providers from limiting their customers' access to VoIP,
or otherwise discriminating against VoIP providers. Interference
with our service or higher charges for using our service as an
additional service to their broadband could cause us to lose
existing customers, impair our ability to attract new customers, and
harm our revenue and growth.
39. State whether or not your 911 services are acceptable to the FCC.
RESPONSE
We have noted this comment and revised our disclosure to clarify our current
compliance with FCC and CRTC requirements. The disclosure has been clarified as
follows:
C.4. If we fail to comply with FCC and CRTC regulations such as
requiring us to provide E-911 emergency calling services, we may be
subject to fines or penalties, which could include disconnection of
our service for certain customers or prohibitions on marketing of
our services and accepting new customers in certain areas.
The FCC released an order on June 3, 2005 requiring us to notify our
customers of any differences between our emergency calling services
and those available through traditional telephone providers and
obtain affirmative acknowledgments from our customers of those
notifications. We complied with this order by notifying all of our
US customers of the differences in emergency calling services and we
obtained affirmative acknowledgments from most of our customers. We
had a limited number of US customers at the time (<20). New
customers activated after this date are well aware of the
limitations of our 9-1-1 services as it is clearly listed in our
Service Agreement.
In July of 2005, the CRTC required us to offer enhanced emergency
calling services, or E-911. The FCC followed suit with a deadline of
November 28, 2005 for the same requirement. The requirement meant
that we had to offer enhanced emergency calling services, or E-911,
to all of our customers located in areas where E-911 service is
available from their traditional wireline telephone company. E-911
service allows emergency calls from our customers to be routed
directly to an emergency dispatcher in a customer's registered
location and gives the dispatcher automatic access to the customer's
telephone number and registered location information. We complied
with both these requirements through our agreement with Northern
Communications Inc., which calls for Northern Communications to
provide and operate a 9-1-1 dispatch center for caller address
verification and call transfer to the emergency services department
closest to the customer's location on behalf of the Company.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
12
TELIPHONE CORP [teliPhone LOGO]
While we have complied with all the current requirements imposed by
both the FCC and the CRTC, we cannot guarantee that we will be
capable of compliance with future requirements. We anticipate that
the FCC and the CRTC will continue to impose new requirements due to
the evolving nature of our industry's technology and usage. The
result of non-compliance will have an adverse effect on our ability
to continue to operate in our current markets, therefore we would
lose existing customers, impair our ability to attract new
customers, and harm our revenue and growth.
40. Clarify whether you have fully complied with the June 3, 2005 FCC
Order regarding notification of customers and their confirmation of
notification.
RESPONSE
We have noted this comment and revised our disclosure to clarify our current
compliance with FCC and CRTC requirements. The disclosure has been clarified
(see our response to number 39 herein).
The Level of Competition is Increasing..." page 12.
41. Clarify whether "numerous small companies" have or merely could
enter the market.
RESPONSE
We have noted this comment and revised our disclosure to clarify the level of
competition that already exists in our marketplace. The disclosure has been
clarified as follows:
Land-based telecommunications technology has not evolved
considerably over the past 125 years. However, the breakthrough of
standardized, internet-based communications is revolutionizing the
entire industry. In the past, significant investments were required
in order to construct the infrastructure required for
telecommunications, however, now that the infrastructure is in
place, smaller investments are required in order to successfully
transmit a voice call using Internet data transfer and sharing
protocols. A new entry, for as little as $100,000, could purchase
the necessary equipment in order to make such a voice call function.
As of the date of the filing of this prospectus, numerous smaller
players have entered the market already. VoIP Action, a leading
market research company following the VoIP industry, reports that
there are currently 379 VoIP residential providers and 439 Small
business VoIP providers in North America. (VoIP North America
Director, VoIPAction, 2006). While barriers to entry to the
marketplace exist including the requirement of further investment to
build a successful company around the technology, the data from VoIP
Action suggests that competition is increasing significantly. This
increase can result in price erosion pricing, which could contribute
to the reduction of profitability and growth of the company. While
numerous providers have entered the market, we have not yet seen as
yet pricing erosion in our market segments, however, this will be a
factor over the next 3-4 years.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
13
TELIPHONE CORP [teliPhone LOGO]
"We Are Exposed to Potential Liability Claims..." page 12
42. Please define "professional liability" and "clinical trial"
RESPONSE
We have noted this comment and revised our disclosure to define professional
liability. The disclosure has been clarified as follows:
Professional liability is coverage specifically tailored to the
delivery of our phone services to the end user. For example, a
customer whose phone service is not functional due to a service
outage may sue us for damages related to the customer's inability to
make or receive a phone call (such as inability to call 9-1-1).
Professional liability insurance exists to cover the Company for any
costs associated with the legal defence, or any penalties awarded to
the plaintiff in such cases.
43. Describe in greater detail the insurance you have.
RESPONSE
We have noted this comment and revised our disclosure to provide our current
policies. The disclosure has been clarified as follows:
The company's current insurance policies cover theft and liability in our
offices only. The company intends to purchase professional liability insurance
which will help to defray costs to the company for defence against damage
claims.
"Risks related to Our Common Stock could depress the price..." page 12
"Future Sales of Common Stock could depress the price..." page 12
44. To the degree practical, disclose how many of the 32,893,843 shares
are owned by persons who are not affiliates. Also describe those
shares which would be subject to the Division's interpretive letter
to Ken Worm dated January 21, 2000.
RESPONSE
We have noted this comment and revised our disclosure as follows:
Effective April 28, 2005, the Company effected the reverse merger
and reorganization with Teliphone Inc., a Canadian company. As OSK
Capital II, Corp. was a blank check company 3,426,000 shares were
eligible for resale under rule 144 on April 28, 2006, one year from
the date of the merger with OSK
"Once publicly traded..." page 13
45. We note that most of the disclosure on pages 13-14 is long and
technical. Some of the information could be discussed in other parts
of the prospectus, such as the plan of distribution section. Please
revise the risk factors accordingly.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
14
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
We have noted this comment and revised our disclosure as follows:
Our common stock is not listed on any exchange or quoted on any
similar quotation service, and there is currently no public market
for our common stock. We have not taken any steps to enable our
common stock to be quoted on the OTC Bulletin Board, and can provide
no assurance that our common stock will ever be quoted on any
quotation service or that any market for our common stock will ever
develop. As a result, stockholders may be unable to liquidate their
investments, or may encounter considerable delay in selling shares
of our common stock. unable to sell your common shares at or above
your purchase price, which may result in substantial losses to you.
"We will incur increased costs..." page 15
46. In appears that this risk factor could apply to any issuer. Please
revise to explain how the risk factor specifically applies to your
company or remove.
RESPONSE
We have noted this comment and revised our disclosure to delete this risk
factor.
Investors in our common stock will experience immediate and substantial dilution
as a percentage of their holdings, page 15.
47. Please provide separate disclosure for the common and preferred
shares regarding number and value.
RESPONSE
We have noted this comment and revised our disclosure to clarify that we have no
preferred stock.
Forward-Looking Statements, page 15
48. We note your disclosure that the forward-looking statements apply
only as of the date of this prospectus. Please note that you are
required to amend your registration statement to update the
information as required by Section 10(a)(3) of the Securities Act or
to disclose any fundamental change in the information in the
registration statement or additional or changed material information
on the plan of distribution. Please disclose this obligation.
RESPONSE
We have noted this comment and revised our disclosure.
Use of Proceeds, page 16
49. Provide the basis for your belief that you will sell all of the
shares you are offering in this registration statement or remove the
paragraph.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
15
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
We have noted this comment and revised our disclosure to more clearly detail the
use of proceeds of funds received.
50. Please revise this section to clearly discuss the circumstances that
would require management to alter the use of proceeds from this
offering and discuss alternatives to the currently stated uses. The
disclosure should specifically state that the use of proceeds will
not vary except in the circumstances you reference. It should also
state how the use of proceeds would be different. Please refer to
Instruction 7 to Item 504 of Regulation S-K for guidance. Also,
please remove the last sentence of this section in the third
paragraph on page 17, which sentence begins: "In must be noted..."
RESPONSE
We have noted this comment and revised our disclosure to more clearly detail the
use of proceeds of funds received.
51. Separately state the offering expenses (approximately $100,000 plus
10% as disclosed in the prospectus summary) from the rest of the
proceeds.
RESPONSE
We have noted this comment and revised our disclosure to separate the offering
expenses from the rest of the proceeds.
52. Please describe the use of proceeds if less than the maximum amount
is raised, including the use of proceeds if only the minimum is
raised. See Item 504 of Regulation S-b. Provide clear
minimum/maximum scenarios since the minimum proceeds would be
approximately $350,000 ($100,000 for legal/accounting + 10% proceeds
for brokerage fees). According to your disclosure, it appears your
maximum net proceeds would be $4.4 million, not $4.5 million as
disclosed ($100,000 for legal/accounting + $500,000 in broker fees
calculated as 10% of $5 million offering).
RESPONSE
We have noted this comment and revised our disclosure to more clearly detail the
use of proceeds of funds received.
53. Please discuss whether officers and directors will purchase shares
in this offering, including purchases to reach the minimum.
RESPONSE
We have noted this comment and revised our disclosure to clarify that officers
and directors will not be purchasing shares as part of this offering.
Professional and Brokerage Fees, page 17.
54. Please clearly indicate here and in the plan of distribution
section, whether the company has entered into negotiations with any
broker-dealer to offer or sell the securities for the company. If
yes, please name the broker-dealer and describe the negotiations and
any agreements or likely agreements between the company and such
broker-dealer.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
16
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
We have noted this comment and revised our disclosure to clarify that we have
not entered into negotiations with any broker-dealer to offer or sell the
securities for the company.
Product Development, page 17.
55. Please provide an estimate of the amount spent during each of the
last two fiscal years on research and development activities. See
Item 101(b)(10) of Regulation S-B. We note your statement that you
currently spend "on average $150,000 per year on activities related
to the continuous development and improvement of [y]our technology."
Please reconcile this statement with the disclosure in the financial
statements. Upon review of the audited financial statements, the
company spent $128,771 in research and development for fiscal year
2005 and $0 in research and development for the year to date in
2006. Please be more specific than "on average $150,000 per year."
In addition, substantiate your assertion regarding these amounts.
RESPONSE
We have noted this comment and revised our disclosure to more clearly detail our
proposed Product Development expenditures.
56. Please clearly indicate whether the funding of the $450,000 for
research and development for the next 12 months will come from the
proceeds raised in this offering. Please explain how the company
will fund such research and development if the maximum is not
raised.
RESPONSE
We have noted this comment and revised our disclosure to clarify that we are
relying on the proceeds of this offering to fund this product development.
Fixed Costs, page 17.
57. Please disclose the basis for your statement regarding an increase
in your telecommunications and web-based traffic or remove.
RESPONSE
We have noted this comment and revised our disclosure as follows:
Upgrades to telecommunications equipment and servers will be made in
order to ensure adequate management of communication traffic growth
for maintenance of superior quality of service for our customers.
Sales and Marketing, page 17.
58. Ensure that you disclose the principal terms of all material
agreements in the business section. Also file each agreement as an
exhibit.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
17
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
We have noted this comment and revised our disclosure to include our material
agreements as exhibits.
59. Please disclose how the company will fund its investment of $900,000
into new clients for VoIP services if the maximum is not raised.
RESPONSE
We have noted this comment and revised our disclosure to more clearly detail the
use of proceeds of funds received, and to outline various spending scenarios
based on the amount of funds that we intent to raise as a part of this offering.
60. We note the statement that, "We require an investment to increase
our customer base to a point where our profits can be reinvested to
acquire additional clients. We estimate that this will be when we
grow an additional 10,000 clients." We note that company's current
cost of revenues and operating expenses greatly exceed operating
revenues. Please provide a reasonable basis for the statement or
remove. We further note the statement that, "At this level of
customers, along with our existing customer base in this segment, we
will have achieved an annualized rate for this segment of $2.8
million per year. Please provide a reasonable basis for the
statement and include the cost of revenues and operating expense or
remove. It appears that this discussion and similar disclosure may
be more appropriate in the "Management Discussion and Analysis"
section.
RESPONSE
We have noted this comment and revised our disclosure to remove this statement.
61. It appears that you have changed the Pink Sheets symbol. Please
advise us and revise the prospectus as appropriate. Also, explain in
more detail the statement that your "Symbol shall change upon the
acceptance... by NASSDAQ"
RESPONSE
We have noted this comment and revised our disclosure to clarify that there is
no public market for our securities.
62. Please substantiate your estimates of an average 3 minute phone
call, $0.04 per call costs, etc.
RESPONSE
We have noted this comment and revised our disclosure to further revise and
substantiate our proposed expenditures regarding this service.
63. We note the statement that, "we anticipate that this will generate
at least 5 million unique users, which could potentially generate up
to $1.2M of annualized revenue on publicity alone." Please provide a
reasonable basis for the statement and include the costs of revenues
and operating expenses or remove. It appears that this discussion
may be more appropriate in the MD&A section.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
18
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
We have noted this comment and revised our disclosure to remove this statement.
Determination of Offering Price, page 18.
64. We note the statement that "after consultation with our
underwriters...". Please name your underwriters.
RESPONSE
We have noted this comment and revised our disclosure, and, as there are no
underwriters, have deleted this reference.
Dilution, page 19
65. Your tabular disclosure does not agree to your narrative. For
example, you present net tangible book value per share after the
offering as $3,846,309, whereas your narrative correctly discloses
this amount as $0.08. Ensure your tabular presentation includes the
net tangible book value per share before and after the offering and
the increase in net tangible book value per share attributable to
new investors. Also, consider using a tabular presentation showing
the components of the denominator and numerator of the pro forma
book value per share calculation.
RESPONSE
We have noted this comment and revised our disclosure to include the following
tabular representations of values per share:
Assumed public offering
price per share $ 0.25
------
Net tangible book value
per share as of June
30, 2006 $(0.03)
------
Increase in net tangible
book value per share
attributable to new
investors $ 0.11
------
Net tangible book value
per share after this
offering $ 0.08
------
Dilution per share to new
investors $ 0.17
------
Amendment- We have updated this table to include the dilution effects to the
year end September 30, 2006:
Assumed public offering
price per share $ 0.25
------
Net tangible book value
per share as of September
30, 2006 $(0.02)
------
Increase in net tangible
book value per share
attributable to new
investors $ 0.08
------
Net tangible book value
per share after this
offering $ 0.06
------
Dilution per share to new
investors $ 0.19
------
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
19
TELIPHONE CORP [teliPhone LOGO]
Plan of Distribution, page 20
66. Please name the officers that will be selling the common shares in
this offering.
RESPONSE
We have noted this comment and revised our disclosure to clarify that the
officers, George Metrakos and Robert Cajolet, have been named as those that will
be selling the common shares in this offering.
Amendment- Effective November 28th, 2006, Mr. Robert Cajolet resigned his
position on the board of Directors of the company. As a result, the plan of
distribution has been updated to include only George Metrakos as the seller of
common shares in this offering.
67. Please file the subscription agreement as an exhibit.
RESPONSE
We have noted this comment and revised our disclosure to include the
subscription agreement is filed as an exhibit.
68. Please revise the disclosure regarding the selling shareholders in
accordance with the terms of the offering.
RESPONSE
We have noted this comment and revised our disclosure to include selling
shareholders and the requisite disclosures.
Legal Proceedings, page 23
69. We note that most of the disclosure in this section duplications the
disclosure on page 25. Please revise to remove duplicative
disclosure and to comply with Item 103 of Regulation S-B.
RESPONSE
We have noted this comment and revised our disclosure to delete the disclosure
on page 25.
Directors, Executive Officers, Promoters and Control Persons, page 24.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
20
TELIPHONE CORP [TeliPhone LOGO]
70. Please clarify why the directors of various company operations are
named in this section. If they are required to be named, please
include their names in the list and identify them as significant
employees as applicable. Also clearly identify which company the
officers, directors or significant employees are affiliated if
different from Teliphone corp.
RESPONSE
We have noted this comment and revised our disclosure to include only executive
officers and directors and deleted persons involved with daily operations of the
company.
71. For each officer, director and significant employee, please describe
all employment during the past five years. See Item 401 (a)(4) of
Regulation S-B. In the description, please include the name and
business of the person's employer, beginning and ending dates of
employment, the positions held and a brief description of the
employer's business.
RESPONSE
We have noted this comment and revised our disclosure to include the following
table:
Beginning and ending Brief Description of Employer's
Employer's name dates of employment Positions Held business
- ------------------------------------------------------------------------------------------- ------------------------------------
George Metrakos Teliphone Inc. Sep 1, 2004 to present President Telecommunications Company
Teliphone Corp. Apr 28, 2005 to present President, CEO, CFO Holding Company
and Director
United American Nov 8, 2005 to present Director Holding Company
Corp.
Metratech Retail Mar 6, 2000 to Aug 31, President & Founder Supply Chain Management Software
Systems Inc. 2004 Company
Robert Cajolet Teliphone Corp. Jun 1, 2005 to present Director Holding Company
Tectacom Inc. Jun 1, 1991 to present President & Founder Telecommunications Company
Nature Genetiks Jul 1 2004 to present Director Holding Company
Capital Inc.
Alphinat Inc. Apr 1, 2004 to Oct 1 2005 President Business Solutions Software Company
Multiple Awnings Inc. Sept 1, 2002 to present Vice President and Household Recreational Products
Director Manufacturer
Coractive HighTech Oct 1, 2005 to present Chairman Specialized Fibre Optic
Inc. manufacturing
Amendment- Please note that Robert Cajolet has been removed from this table due
to his resignation on November 28th, 2006.
72. Please provide the name of the entity providing the award to Mr.
Metrakos.
RESPONSE
We have noted this comment and revised our disclosure to include that the entity
that awarded Mr. Metrakos was the City of Montreal Chamber of Commerce youth
wing.
73. Please describe how Mr. Ratthe "leads" the team of 60 resellers and
two sales representatives.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
21
TELIPHONE CORP [TeliPhone LOGO]
RESPONSE
We have noted this comment and revised our disclosure to remove Mr. Ratthe as he
is not an Officer, Director or significant employee of the company.
Compliance with Section 16(a) of the Exchange Act, page 25
74. Please update this section.
RESPONSE
We have noted this comment and have disclosed the following:
For the fiscal year ending September 30, 2004, all of the Company's
officers, directors and principal shareholders are delinquent in
filing reports required under Section 16(a) Code of Ethics. The
Company has adopted a code of ethics which applies to its principal
executive officer, principal financial officer, principal accounting
officer or persons performing similar functions. A copy of the code
is attached to this prospectus as Exhibit 14.
75. In the last sentence, replace the word "report" when you refer to
the registration statement or prospectus.
RESPONSE
We have noted this comment and have revised the disclosure to include the proper
terminology.
Compensation of Board Members, page 26.
76. Provide an appropriate heading for the executive compensation
section.
RESPONSE
We have noted this comment and have revised the disclosure to show the heading
as "Executive Compensation"
77. In conformity with Item 402 of Regulation S-B, provide a table or
tables for executive compensation for the past three completed
fiscal years for the company and its acquisition.
RESPONSE
We have noted this comment and have revised the disclosure as follows:
Long Term Compensation
----------------------------------------------------------------
Annual Compensation Awards Payouts
--------------------------------------------------------------------------------------
Securities
Underlying All Other
Other Annual Restricted Stock Options/SARs LTIP Compen-
Name and Principal Position Year Salary Bonus Compensation Award (s) (#) Payouts sation
- --------------------------------------------------------------------------------------------------------------------
GEORGE METRAKOS 2005 $48,000 -- -- 961,538 -- -- --
President, Chief
Executive Officer, CFO
and Director
2004 $ 4,000 -- -- --
2003 -- -- -- -- -- -- --
Robert Cajolet 2005 -- -- -- 1,250,000 -- -- --
Director
2004 -- -- -- -- -- -- --
2003 -- -- -- -- -- -- --
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
22
TELIPHONE CORP [TeliPhone LOGO]
Please note that this table has been updated to reflect the resignation of Mr.
Cajolet as Director of the company on November 28th, 2006, as well as to update
the salaries due to the FYEnd 2006 audit numbers. The table now reads:
Long Term Compensation
----------------------------------------------------------------
Payouts
--------------------------------
Awards Securities
Annual Compensation ------------------------------ Underlying All Other
-------------------- Other Annual Restricted Stock Options/SARs LTIP Compen-
Name and Principal Position Year Salary Bonus Compensation Award (s) (#) Payouts sation
- -------------------------------- ---- ------- ----- ------------ ---------------- ------------ ------- ---------
GEORGE METRAKOS
President, Chief 2006 $52,501 -- -- -- -- -- --
Executive Officer, CFO 2005 $48,000 -- -- 961,538 -- -- --
and Principal Accounting Officer
Director
2004 $ 4,000 -- -- --
Robert Cajolet 2006 -- -- -- -- -- -- --
Former Director 2005 -- -- -- 1,250,000 -- -- --
Resigned Nov. 28, 2006 2004 -- -- -- -- -- -- --
78. We note the disclosure that Mr. Metrakos is "currently compensated
$50,000 annually through our majority-owned subsidiary Teliphone
Inc." Please explain the company structure and describe this
structure in more detail in the description of business section.
Also describe the other "subsidiaries". We may have further comment.
RESPONSE
We have noted this comment and have revised the disclosure as follows:
Teliphone Corporation (the "Company") was incorporated in the State
of Nevada on March 2, 1999 to serve as a vehicle to effect a merger,
exchange of capital stock, asset acquisition or other business
combination with a domestic or foreign private business. Effective
April 28, 2005, the Company achieved its objectives with the reverse
merger and reorganization with Teliphone Inc., a Canadian company.
On August 18, 2006, we changed our name from OSK Capital II Corp. to
Teliphone Corp.
As a result of the merger and re-organization, Teliphone Inc., a
Canadian Company became our wholly owned subsidiary. On July 14th,
2006, the Company entered into a Letter of Intent with Intelco
Communications in order to sell off approximately 25% of the
subsidiary Teliphone Inc. in return for additional investment in the
company. As a result of this transaction, Teliphone Inc. will remain
a majority-owned subsidiary of the Company. The Company does not
have any other subsidiaries.
Security Ownership of Certain Beneficial Owners and Management, page 26
79. Please update the table
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
23
TELIPHONE CORP [TeliPhone LOGO]
RESPONSE
We have noted this comment and have revised the disclosure as follows:
SHARES
BENEFICIALLY PERCENT
NAME TITLE OF CLASS OWNED (1) CLASS(1)
- -------------------------------------------------------------------------
George Metrakos(2) Common 961,528 2.9%
Robert Cajolet(3) Common 1,250,000 3.8%
Officers and Directors Common 2,211,528 6.7%
As a Group (2 persons)
United American Corporation (3) Common 25,737,785 78.2%
Officers, Directors and
Certain Beneficial Owners
As a Group (3 persons) Common 27,949,312 85.0%
(1) Applicable percentage of ownership is based on 32,893,843 shares of fully
diluted common stock effective November 23, 2006. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect to
securities. Shares of common stock subject to options that are currently
exercisable or exercisable within sixty days of September 30, 2005 are deemed to
be beneficially owned by the person holding such options for the purpose of
computing the percentage of ownership of such person, but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person.
(2) George Metrakos controls 961,528 shares of his stock through Metratech
Business Solutions Inc of which he is the beneficial owner.
(3) Robert Cajolet controls his stock through XIPE Management Corp, and Beverly
Hills Trading Corp.
(4) United American Corporation is the founder of Teliphone Inc. On October 23,
2006, Shareholders of United American Corp voted in the majority to spin off its
holdings of Teliphone Corp. through a pro-rata distribution of Teliphone Corp.
shares to United American Corp. Shareholders. The effective date of the spin-off
was October 30, 2006. United American Corp and Teliphone Corp. are awaiting
instructions from the Depository Trust Corporation regarding fractional share
issuances required by brokers in order to complete the distribution. The
distribution of shares to United American Shareholders will occur in December,
2006.
Amendment- Due to the resignation of Robert Cajolet as Director, this table has
been updated as:
SHARES
BENEFICIALLY PERCENT
NAME TITLE OF CLASS OWNED (1) CLASS(1)
- -------------------------------------------------------------------------
George Metrakos(2) Common 961,528 2.9%
Officers and Directors
As a Group (1 person) Common 951,528 2.9%
United American Corporation (3) Common 25,737,956 78.2%
Officers, Directors and
Certain Beneficial Owners
As a Group (2 persons) Common 26,699,484 79.6%
80. Please state in the table whether the named beneficial owners hold
outstanding options. If yes, provide a footnote to the owner's name
in the table. Disclose the number of options in the footnote.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
24
TELIPHONE CORP [TeliPhone LOGO]
RESPONSE
We have noted this comment and there are no options issued and outstanding.
81. In Note 3 to the beneficial ownership table you have stated: "UAMA
[United American Corporation], which owns 78.2% shares of common
stock of the registrant] intends to pay a special dividend of
Teliphone's shares to its shareholders once Teliphone is trading and
is financially independent of its founding parent." Please disclose
the number of shares it will include in the special dividend. Also,
explain when Teliphone will be "financially independent of its
founding parent."
RESPONSE
On October 10, 2006 United American Corporation filed its Definitive Proxy
Statement on form DEF 14A. Item 4 of this proxy statement is the following:
"To approve a plan to spin-off Teliphone Corp. ("Teliphone"), a majority-owned
subsidiary of United American Corporation"
Shareholders of United American Corporation have voted at their Annual General
Meeting of Shareholders held on October 23rd, 2006 in favour of the spin-off of
Teliphone Corp. and is paying its shareholders its holdings of 25,737,785 shares
of the common stock of Teliphone Corp. on a pro rata basis to its shareholders.
As a result, the Note 3 disclosure is no longer required.
Amendment- Please note that due to the issuance of fractional shares on December
6th, 2006 at the request of the Depository Trust Corporation for the
distribution of Teliphone Corp. shares to United American Corporation
shareholders, the number of shares owned by United American Corporation has
increased by 171 shares to 25,737,956.
82. We note the statement in Note 1 under the table of beneficial owners
that "Applicable percentage of ownership is based on 32,893,843
shares of fully diluted common stock." In view of your disclosure
that the number of outstanding shares is 31,089,520, the above
statement could, but not necessarily does, indicate that you are
registering stock underlying options. Please advise us of the
following uncertainty and make any applicable changes in the
disclosure.
RESPONSE
The Company confirms that we are not registering stock underlying options.
Description of Securities, page 27
Common Stock, page 27
83. Please describe any dividend and pre-emption rights as required by
Item 202(a) of Regulation S-B.
RESPONSE
We have noted this comment and have revised the disclosure as follows:
The holders of our common stock (i) have equal ratable rights to
dividends from funds legally available therefore, when, as and if
declared by our Board of Directors; (ii) are entitled to share in
all of our assets available for distribution to holders of common
stock upon liquidation, dissolution or winding up of our affairs;
(iii) do not have preemptive, subscription or conversion rights and
there are no redemption or sinking fund provisions or rights; and
(iv) are entitled to one non-cumulative vote per share on all
matters on which stockholders may vote.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
25
TELIPHONE CORP [TeliPhone LOGO]
Disclosure of Commission Position of Indemnification for Securities Act
Liabilities: Anti-Takeover, Limited Liability and Indemnification, page 27
84. Please provide the disclosure required by Item 510 of Regulation
S-B.
RESPONSE
We have noted this comment and have revised the disclosure as follows:
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and
controlling persons pursuant to the provisions above, or otherwise,
we have been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy
as expressed in the Securities Act, and is, therefore,
unenforceable.
In the event that a claim for indemnification against such
liabilities, other than the payment by us of expenses incurred or
paid by one of our directors, officers, or controlling persons in
the successful defense of any action, suit or proceeding, is
asserted by one of our directors, officers, or controlling person in
connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification is against public policy
as expressed in the Securities Act, and we will be governed by the
final adjudication of such issue.
Certain Relationships and Related Transactions, page 29
85. Ensure that you disclose the related transactions, providing all the
information Item 404 of Regulation S-B requires, including, but not
necessarily limited to the loan payable to the related party, as
shown on page 3.
RESPONSE
The Company other than its borrowings does not engage in significant related
party transactions. The loans payable have been disclosed as they represent the
related party transactions of the Company. Please refer to the cash advance
agreement between The Company and its former parent company, United American
Corporation filed in the exhibits. There are no other related party
transactions.
Accounting Matters, page 29
86. Please revise the statement that, "Both Legal Counsel and Experts
have no interest in this registration statement..." to include the
August 18, 2006 issuance of 25,000 shares of stock to Joseph I.
Emas, counsel, as disclosed on page II-2 of the registration
statement. Revise the "Interest of Named Experts and Counsel"
section accordingly.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
26
TELIPHONE CORP [TeliPhone LOGO]
RESPONSE
We have noted this comment and have revised the disclosure as follows:
. . . except that Mr. Joseph I. Emas, Attorney at Law, Miami,
Florida, has received 25,000 shares of our common stock.
Additional Information, page 29.
87. Please revise to provide the correct street address of the
Commission, that is, 100 F Street, NE.
RESPONSE
We have noted this comment and have revised the disclosure.
88. Please remove the language "are qualified in their entirety by
reference to each such contract..." Alternatively, state that all
material terms of each contract are disclosed in the prospectus.
RESPONSE
We have noted this comment and have revised the disclosure.
Description of Business, page 31
89. Please revise the business section to remove duplicative disclosure.
RESPONSE
We have noted this comment and have revised the disclosure to remove duplicative
disclosure in the amended filing.
90. Please substantially revise your document, particularly the business
section, replacing the technical jargon and language with plain
English so that the ordinary reasonable investor can understand your
disclosure. For example, the disclosure on page 32 that "VoIP
communications are carried as data packets and require a broadband
Internet connection that has sufficient bandwidth to deliver
uninterrupted data" is disclosure that should be revised into plain
English. Also, special terms that would not be understood by the
ordinary reasonable investor should be defined the first time they
are used. Please refer the Staff Legal Bulletin 7 and its update,
which are located at http://www.sec.gov/interps/legal/slbcf7.htm and
http://www.sec.gov/interps/legal/cfslb7a.htm, respectively and
revise your disclosure accordingly.
RESPONSE
We have noted this comment and have revised the disclosure to include plain
English descriptions.
91. We note various comparative factual assertions, qualitative
statements, and projections throughout your registration statement,
especially, but not limited to your business section. Please note
that the reasonable basis for all such assertions, statements, and
projections must have a reasonable basis and be clear from text of
the prospectus. Please provide us with the reasonable basis of
support for such statements and summarize the support in your
disclosure. If a third party is the source of the information,
please name the third party and the publication where the
information can be found. If the information is not readily
available to the public, please file the third party's consent to
being named in the prospectus and to the summary contained in the
disclosure. If you cannot provide us with the reasonable basis for
these assertions, you should delete them.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
27
TELIPHONE CORP [TeliPhone LOGO]
RESPONSE
We have noted this comment and have revised the disclosure to provide reasonable
basis for any assertions.
92. We note that a significant amount of the disclosure in the business
section is promotional rather than factual. Please significantly
revise the business section to remove promotional statements.
RESPONSE
We have noted this comment and have revised the disclosure to delete promotional
information.
Company History: Organization within the Last Five Years, page 31.
93. Please describe the business combination between Teliphone Inc. and
OSK Capital II Corp. See Item 101(a) of Regulation S-K. Please
disclose the principal terms of the combination, name the parties
negotiating the combination, disclose the method used in determining
the acquisition price, name any third parties that were involved in
the combination and the compensation paid to them, and disclose the
effects of the acquisition on the management and control persons of
OSK Capital II. Disclose any relationship between OSK Capital II,
its officers, directors and affiliates and Teliphone Inc. prior to
the combination. Also, disclose whether finders' fees or consulting
agreements were provided as part of the combination. Please file all
agreements relating to the combination as exhibits.
RESPONSE
We have noted this comment and have revised the disclosure.
The details of the merger and re-organization, along with the principal
negotiators of the agreement are as follows:
The merger and re-organization of April 28, 2005 was a business combination
between Teliphone Inc. and OSK Capital II Corp. As a result, Teliphone Inc.
became a wholly-owned subsidiary of OSK Capital II Corp.
The Principal terms of the combination were that a recapitalization occurred as
a result of the reverse merger. The shareholder's equity of OSK Capital II Corp.
became that of Teliphone Inc. Original shareholders of OSK Capital II Corp.
maintained their shareholdings of OSK Capital II Corp. and new treasury shares
of OSK Capital II Corp. were issued to shareholders of Teliphone Inc.
The parties who negotiated the merger and reorganization agreement were:
o George Metrakos, President of Teliphone Inc. who became
President CEO of OSK Capital II Corp. George Metrakos was not
compensated in this transaction. George Metrakos already owned
3.9% of Teliphone Inc. prior to the combination and hence
received the 961,528 shares of Corp. in exchange for his 4
shares of Teliphone Inc. These shares are listed under
Metratech Business Solutions Inc., a wholly-owned company of
George Metrakos.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
28
TELIPHONE CORP [TeliPhone LOGO]
o Robert Cajolet, President and CEO of Teliphone Corp. who
stayed on the board of OSK Capital II Corp. after the
transaction as director. Robert Cajolet was compensated with
the issuance of 1,250,000 restricted shares of the Company
stock (1,000,000 shares currently held within 2,000,000 share
block of Beverly Hills Trading). He was not provided any
monetary compensation.
o Benoit Laliberte, President and CEO of United American Corp.
at the time. He did not receive any compensation in the
transaction, however United American Corp received 24,038,462
shares of Corp. in exchange for their 100 shares of Teliphone
Inc.
o Francis Maillot, Former President and CEO of OSK Capital II
Corp prior to Robert Cajolet, during negotiations acting as
broker from Beverly Hills Trading Corp. Beverly Hills Trading
Corp. received a total of 2,000,000 shares of OSK Capital II
Corp., and are the beneficial owner of 1,000,000 of them (see
Robert Cajolet, above)
94. Please clearly indicate here and throughout the registration
statement, whether Teliphone Inc. merged into Teliphone Corp. (OSK
Capital II Corp.) whereupon Teliphone Corp. became the surviving
entity.
RESPONSE
We have noted this comment and have revised the disclosure.
95. Please explain the spin-off in more detail, including the purpose of
the spin-off and when the company determined to enter into the
spin-off. Please explain whether the spin-off was a consideration
when entering into the merger with Teliphone Inc.
RESPONSE
We have noted this comment and have revised the disclosure as follows:
On October 30, 2006, United American Corporation spun off their
share position in our Company through the pro rata distribution of
their 25,737,785 shares to their shareholders. Although there were
no contractual obligations on the part of the company or United
American Corporation, this spin off was part of a long term strategy
of United American Corporation.
Amendment- Please note that due to the fractional share issuance to United
American Corporation, their holdings have increased 171 shares to 25,737,956 on
December 6th, 2006.
96. Ensure that you disclose the principal terms of all material
agreements you have referenced. Also, name the parties to all the
material agreements which you have referenced. In addition, file
them as exhibits.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
29
TELIPHONE CORP [TeliPhone LOGO]
RESPONSE
We have noted this comment and have revised the disclosure to include all
referenced agreements as exhibits.
Business Overview, page 32
97. Please explain and disclose the basis of your description "high
growth market segment effective" in the first paragraph of this
section. If you cannot provide a reasonable basis for the statement,
you should remove it. Also, disclose the basis of the growth rate in
new VoIP subscribers in the fourth and fifth paragraphs.
RESPONSE
We have noted this comment and have revised the disclosure.
98. In the first paragraph at the top of page 34, provide an estimate of
your revenues during the last fiscal year in each of Quebec, Ontario
and the state of New York.
RESPONSE
We have noted this comment and have revised the disclosure to eliminate the
regions of Ontario and the state of New York as sales territories, as sales to
this area are not material.
99. We note the statement that "Teliphone agreed to issue 35 class A
voting shares of its common stock". Please explain this class A
voting shares of common stock in the "Description of Securities"
section. Please clarify whether the class A voting shares is a
separate class than the common stock to be sold in this offering. If
so, please explain the differences and include the class in the
beneficial ownership table. Also, include the issuances of these
securities as required under Item 26 of the registration statement.
We may have further comment.
RESPONSE
We have noted this comment and have revised the disclosure to delete any
reference to any Class A shares as the Company has not authorized such shares.
This was a reference to Teliphone Inc.'s class shares. The disclosure has been
revised to further clarify.
100. In the second paragraph on page 34, please clarify whether the
registrant, Teliphone Corp. plans to issue securities. Please
disclose the status of Teliphone Inc.
RESPONSE
We have noted this comment and have revised the business section disclosure.
101. Please explain in more detail the statement that "Teliphone also
agreed to make available to the customers of Intelco Communications
certain proprietary software for broadband telephony use."
RESPONSE
We have noted this comment and have revised the business section disclosure.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
30
TELIPHONE CORP [TeliPhone LOGO]
Products and Services, page 34
102. Please describe in more detail the statement "value-added
telecommunications."
RESPONSE
We have noted this comment and have revised the business section disclosure.
VoIP Phone Market, page 34
103. Describe in greater detail the basis for the assertions in this
section or remove.
RESPONSE
We have noted this comment and have revised the business section disclosure.
Services Sold Direct to Customer, page 34
teliPhone Mobile VoIP and Single Point of Contact services (MobilNation), page
34
104. On page 35, explain, or cross-reference an explanation of, the company's
Retail Sales Points.
RESPONSE
We have noted this comment and have revised the business section disclosure.
Wholesale Services, page 36
105. Identify the other party to the Preliminary Letter of Intent. Also,
disclose the status of the negotiations with the other
telecommunications resellers.
RESPONSE
We have noted this comment and have revised the business section disclosure.
CallOnA.com, page 36
106. Please provide us the documents, or excerpts from the documents, on
which you have based your statements regarding the research of The
Kelsey Group.
RESPONSE
We have noted this comment and have revised the business section disclosure to
delete references to the Kelsey Group.
Growth Strategies, page 38.
107. In the last paragraph on page 38, please define "white-label
partnerships".
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
31
TELIPHONE CORP [TeliPhone LOGO]
RESPONSE
We have noted this comment and have revised the business section disclosure to
delete references to white label partnerships.
Phase 2... page 39
108. Update this section to the latest date practicable.
RESPONSE
We have noted this comment and have revised the business section.
Advertising and Marketing, page 39.
109. Ensure that you describe the principal terms of all material
agreements you have referenced in this section. File each as an
exhibit, including, but not limited to, the October 12, 2004
agreement with XO Communications Inc.
RESPONSE
We have noted this comment and have revised the business section.
Intellectual Property, page 41.
110. Describe the intellectual property which you referenced and your
ownership interests.
RESPONSE
We have noted this comment and have revised the business section.
VoIP E-911 Matters, page 43
111. Update the second paragraph of this section to the latest date
practicable.
RESPONSE
We have noted this comment and have revised the business section.
Provisions of 911 Services, page 44.
112. Update the first paragraph to the latest date practicable.
RESPONSE
We have noted this comment and have revised the business section.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
32
TELIPHONE CORP [TeliPhone LOGO]
Our Employees, page 44
113. Please disclose the number of full-time employees as required by
Item 101(b)(12) of Regulation S-B
RESPONSE
We have noted this comment and have revised the disclosure to include the
following:
The company has seven full time employees and two additional part time
employees.
Retail Outlets, page 45
114. Please describe the company's relationship to the retail outlets.
RESPONSE
We have noted this comment and have revised the business section.
Management's Discussion and Analysis of Financial Condition Plan of Operations,
page 45.
115. We believe your MD&A section could benefit from expanded "Overview"
sections that offer investors and introductory understanding of
Teliphone Corp. and the matters with which management is concerned
primarily in evaluation the company's financial condition and
operating results. A good introduction, accordingly, might include a
discussion of the following: the economic or industry-wide factors
relevant to the company; a discussion of how the company earns or
expects to earn revenues and income; the identity of the company's
primary business lines, location(s) of operations and principal
services' and insight into material opportunities, challenges,
risks, and material trends and uncertainties. To the extent known,
provide insight into challenges, risks and opportunities of which
management is aware and discuss any actions being taken to address
the same. For a more detailed discussion of what is expected in both
the subheading and the MD&A section in general, please refer to:
http://www.sec.gov/rules/interp/33-8350.htm. See also Item 303 of
Regulation S-K.
RESPONSE
We have noted this comment and have revised the MD&A section.
Results of Operations, page 46
116. For each period discussed, please revise MD&A to describe and
quantify your sources of revenue (ie. residential and business)
consistent with your response to our prior comment 2. Also, revise
to discuss the amount of research and development expenses for each
period presented.
RESPONSE
For the period ending September 30, 2005, we earned total revenues of $183,253
from Residential and Business Customers. Our Residential customers accounted for
$161,453 and our Business customers accounted for $21,800.
We will update our disclosure to include the following:
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
33
TELIPHONE CORP [TeliPhone LOGO]
The Company recorded sales of $183,253 for the year ended September
30, 2005 as compared to $3,447 for the period August 27, 2004
through September 30, 2004. This revenue was derived from the sale
of VoIP hardware and services to Residential ($161,453) and Business
($21,800) customers. For the period ending September 30, 2004, all
revenues were attributed to Residential customers.
Amendment- Since finalizing the audit of the Company's September 30, 2006
financial statements, the Company has updated this disclosure to the following:
The Company recorded sales of $440,804 for the year ended September 30, 2006 as
compared to $183,253 for the year ended September 30, 2005. This revenue was
derived from the sale of $372,248 of VoIP hardware and services to Residential
and Business Retail clients and $68,556 VoIP hardware and services to Wholesale
customers. For the year ended September 30, 2005, all revenues were attributed
to Retail Clients.
Liquidity and Capital Resources, page 48
117. Please revise your disclosure to include an analysis of the
components of the statements of cash flows (ie. operating, investing
and financing activities) that explains the significant
period-to-period variations in the line items for the interim period
ended June 30, 2006.
RESPONSE
We have noted this comment and have revised the MD&A section.
Amendment- this section has been updated to include analysis of the components
of the statements of cash flows for the year ended September 30, 2006.
118. Please revise to discuss the fact that you are in the process of
raising monies by offering 20,000,000 shares of common stock at
$0.25 per share. Disclose how you intend to use the funds generated
(3g. repay debt, working capital, etc.).
RESPONSE
The Company has revised its disclosure in order to include the following
information regarding use of proceeds through the current offering.
The Company has undertaken a private placement of 20,000,000 of its
shares of common stock at $0.25 per share. The Company anticipates
proceeds of this offering to be approximately $4,750,000 after the
payment of closing costs of approximately $250,000.
The Company anticipates utilizing these proceeds to continue to
pursue and carry out its business plan, which includes marketing
programs aimed at the promotion of the Company's services, hiring
additional staff to distribute and find additional distribution
channels, search for additional companies to bring under the
corporate umbrella and enhance the current services the Company is
providing, and compliance with Sarbanes - Oxley Section 404."
Certain Relationships and Related Transactions, page 50
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
34
TELIPHONE CORP [TeliPhone LOGO]
119. Some of the information on pages 50-52 duplicates disclosure in
other parts of the prospectus. Please revise to remove duplicative
disclosure.
RESPONSE
We have revised our disclosure in order to remove duplicative disclosure
Market for Common Equity and Related Stockholder Matters, page 50.
120. It appears there is a typographical error in this section regarding
the minimum offering. Please reconcile the disclosure in this
section, which states that the minimum offering is 20,000,000
shares, with the cover page which states that 2,000,000 shares is
the minimum offering.
RESPONSE
We have noted this comment and have revised the typographical error.
121. Please disclose the amount of common stock that could be sold
pursuant to Rule 144 under the Securities Act as required by Item
201 of Regulation S-B. Please disclose the amount of securities that
are subject to the Division's interpretive letter to Ken Worm dated
January 21, 2000.
RESPONSE
We have noted this comment and revised our disclosure as follows:
Effective April 28, 2005, the Company effected the reverse merger
and reorganization with Teliphone Inc., a Canadian company. As OSK
Capital II, Corp. was a blank check company 3,426,000 shares will be
eligible for resale under rule 144 on April 28, 2006, one year from
the date of the merger with OSK.
Outside Back Cover Page of the Prospectus
122. The advice to dealers of their prospectus deliver requirements
should be on the outside back cover page of the prospectus, rather
than the inside front cover page, where you have placed it. See Item
502 (b) of Regulation S-B.
RESPONSE
We have noted this comment and revised our disclosure (for the back cover page)
as follows:
Dealer Prospectus Delivery Obligation
"Until ______________, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions."
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
35
TELIPHONE CORP [teliPhone LOGO]
Report of Independent Public Accounting Firm-2004
123. We note that you responded to our prior comments 3 and 5 by filing
the report cover the shell company's financial statements for fiscal
years 2003 and 2004. The shell company's financial statements and
related audit reports are irrelevant due to the reverse acquisition.
Please delete this report from the registration statement and file
an audit report covering the restated 2004 financial statements of
Teliphone. Note that the audit report dated July 13, 2005 covering
the 2004 financial statements of Teliphone as filed in the merger
Form 8-K may not be filed in the SB-2 unless it is redated or
dual-dated to reflect the subsequent audit of the US GAAP-based
financial statements and the retroactive restatement to reflect the
effect of the reverse acquisition.
RESPONSE
The Company will delete this report from the registration statement in its
amendment. The company will request a redated letter in order to reflect the
subsequent audit of the US GAAP-based financial statements and the retroactive
restatement to reflect the effect of the reverse acquisition.
Statement of Operations
124. We note that Teliphone reported a net loss of $31,220 for the period
from August 27, 2004 to September 30, 2004 in the amended Form 8-K
filed on April 7, 2006 yet the financial statements for this period
as filed in the SB-2 report a net loss of $29,530, a difference of
$1,690. It appears that the difference represents Accumulated Other
Comprehensive Income (Loss), please explain why it is included in
net loss in the 8-K.
RESPONSE
The 8-K financials were prepared by a predecessor auditor, who inadvertently
included the translation losses resulting from the foreign currency in the
statement of operations rather than the accumulated other comprehensive income
(loss). The reclassification was immaterial and the predecessor approved the
change and it will be covered in their amended report letter in the amended
SB-2.
Statement of Stockholder's Equity
125. Your statement of stockholder's equity does not appear to properly
present the recapitalization. The initial capitalization at August
27, 2004 and net loss and accumulated comprehensive loss for 2004
should be that of Teliphone, except the initial number of shares
issued (100) should be adjusted to reflect the exchange ratio
inherent in the merger. Accordingly, we would expect to see
27,010,000 shares issued during 2004 and outstanding at the end of
that year. The valuation of those shares should remain unchanged.
The recapitalization should be reflected in the period in which it
occurred, the fiscal year ended September 30, 2005. The
recapitalization transaction should assume the issuance of 3,416,000
shares to the shell company along with the par value (ie. $3,416)
and related additional paid-in capital (ie. $66,554). Finally, the
accumulated deficit of the shell company at the acquisition date
should be eliminated with an offsetting entry to additional paid-in
capital. Further adjustments to additional paid-in capital may be
required.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
36
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
The company understands your comment and has made the necessary adjustments to
the amended financial statements as noted in the amended filing.
Amendment- the company has amended the filing to include figures relating to its
September 30, 2006 audited year end financial statements.
126. In connection with the comment above, please revise your calculation
of weighted average shares and earnings per share for the years
ended September 30, 2004 and 2005.
RESPONSE
The company understands your comment and has made the necessary adjustments to
the amended financial statements as noted in the amended filing.
Amendment- the company has amended the filing to include figures relating to its
September 30, 2006 audited year end financial statements.
Notes to Audited Financial Statements
Note 2-Summary of Significant Accounting Policies
Revenue Recognition
127. Please revise your revenue recognition policy to clarify how and
when you recognize activation and disconnect fees (e.g. over term of
service contract). In connection with your response, tell us how
your revenue recognition policy complies with the guidance in
Question 1 of Section A(3)(f) of SAB 104.
RESPONSE
The Company has amended its revenue recognition policy. Below is the revisions
made to the Company's policy on activation and disconnect fees. This policy is
in compliance with SAB 104, and is consistent with other providers in this
industry.
Activation and Disconnect Fees
The Company also generates revenue from initial activation fees associated
with the service contracts, and disconnect fees associated with early
termination of service contracts. These fees are included in service
revenue as they are considered part of the service component when the
service is delivered or performed.
128. Please revise your revenue recognition policy to clarify how and
when you record commissions paid to wholesalers (e.g. as an expense
or adjustment to revenue). In connection with your response, tell us
how your policy related to these commissions complies with the
guidance in Issue 1 of EITF 01-9.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
37
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
The Company has amended its revenue recognition policy. Below is the revisions
made to the Company's policy on commissions paid to wholesalers. This policy is
in compliance with EITF 01-9, and is consistent with other providers in this
industry.
Commissions Paid to Wholesalers
Commissions paid to wholesalers is recognized as a cost of sales due to
the Company receiving an identifiable benefit in exchange for the
consideration, and the Company can reasonably estimate the fair value of
the benefit identified. Should the consideration paid by the Company
exceed the fair value of the benefit received, that amount would be
reflected as a reduction of revenue when recognized in the Company's
statement of operation.
129. For your retail sales, we note you refund the customer the equipment
charge over a three-month period if the customer satisfies the
minimum service period. Since you refund the equipment charge to
customers when minimum service requirements are met, it appears that
the price of the equipment is neither fixed nor determinable and
cannot be recognized as revenue in accordance with SAB 104. Furnish
a complete explanation of how you recognize revenue relating to
equipment, how you account for the refund, and identify the minimum
service period. Please reference the specific literature that
supports your accounting policy and explain how the literature is
applicable to your fact pattern. Provide the accounting for a sample
transaction involving the sale of equipment to a customer through a
re-seller. Please revise your revenue recognition policy to clarify
your accounting for equipment sales and refunds.
RESPONSE
The Company believes that the recognition with respect to its customer equipment
does meet the requirements of SAB 104, as the price is determinable, and should
its customers meet the minimum service requirements, the price is refunded
through their service revenue.
The Company has amended its revenue recognition policy. Below is the revisions
made to the Company's policy on customer equipment. This policy is in compliance
with SAB 104, and is consistent with other providers in this industry.
Customer Equipment
For retail sales, the equipment is sold to re-sellers at a subsidized
price below that of cost and below that of the retail sales price. The
customer purchases the equipment at the retail price from the re-seller.
The customer accepts the terms of the service agreement upon activation by
credit card. Should the Company's customers meet the minimum service
requirements, the fee paid by the customers for the equipment would be
refunded through monthly service billing. This refund is reflected in
customer equipment revenue.
Customer equipment expense is recorded to direct cost of goods sold when
the hardware is initially purchased from our suppliers.
For wholesale customers, there are no refunds for equipment. The Company
does not subsidize equipment sales to wholesale customers.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
38
TELIPHONE CORP [teliPhone LOGO]
Note 10- Subsequent Events
130. We reviewed your response to our prior comment 7. Your response did
not address our comment. As you plan to account for the transaction
with IPhonia as an asset acquisition, tell us how you determined
this accounting treatment, and related reporting requirements, is
consistent with Rule 11-01 (d) of Regulation S-X. Please provide us
with an analysis that addresses each of the conditions of Rule
11-01(d) of Regulation S-X. If this transaction is considered to be
a business combination that is material at the 50% level, financial
statements of IPhonia are required to be filed in the SB-2.
RESPONSE
The Company had disclosed the fact that it has entered into an agreement with
Iphonia dated December 7, 2005. The Company and Iphonia have not closed on this
transaction as of yet, and once the transaction is completed, should it be
completed, the Company will report the transaction in accordance with the
appropriate reporting requirements.
The updated disclosure is as follows:
On December 7, 2005, the Company entered into, in conjunction with United
American Corporation, a related party, a Customer and Asset Acquisition
and Software Licensing Agreement with Iphonia, Inc., a Quebec corporation.
The proposed agreement requires transfer of Iphonia Inc.'s. clients and
services to the Company along with the sale of various telecommunications
equipment.
The proposed agreement with Iphonia although signed in December 2005, has
not actually commenced due to the Company being unable to currently
provide the necessary services to the customer base of Iphonia. There is
no timeframe for actual commencement of this agreement. The Company is
currently evaluating the terms of the agreement, and will revise this
agreement should the parties agree to the new terms.
Interim Financial Statements
General
131. Please reconcile the amounts presented in the financial statements
for the period ended June 30, 2005 with those presented in Form
10-QSB/A filed June 13, 2006 for the period ended June 30, 2005.
Tell us why several of the figures have changed, including revenue,
gross profit, net loss, earning per share and total cash flows from
each category (Operating, investing, financing).
RESPONSE
Any of the adjustments made in the restatement of the financials as filed using
form 10-QSB/A were a result of verifications by our new auditor, Michael
Pollack, CPA.
Interim Statements of Operations
132. Please revise to disclose earnings per share information for each
period presented in accordance with SFAS 128.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
39
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
The Company's financial statements include per share information for all periods
presented.
Notes to Financial Statements
Note 10-Subsequent Events
133. Tell us how you plan to account for each component (e.g. Teliphone
stock issuance and valuation, line of credit, software license,
etc.) of the agreement with 3901823 Canada Inc. entered into in
July, 2006. Please cite the relevant authoritative literature
supporting each of your conclusions.
RESPONSE
As noted in the disclosure, Teliphone Inc. issued 35 Class A common shares
representing 25.2% of the issued shares of Teliphone inc to 3901823 Canada Inc.
In return, Teliphone Inc. received and/or will receive use of office space, use
of Intelco com data center for Teliphone Inc equipment and use of Intelco's
broadband telephony network for the period of 1 year. 3901823 Canada Inc.,
Intelco and Teliphone Inc. agreed that the value of these services was
Cdn$144,000. This will be a prepayment on Teliphone Inc.'s balance sheet will be
offset monthly as the services are delivered.
The line of credit is a separate transaction which will be reflected by
Teliphone Inc. as a liability when they draw down on the line of credit.
Under FASB-115, 3901823 Canada Inc. will record the investment in Teliphone Inc.
as an equity investment, and will own 25.2% of the issued and outstanding Class
A shares of Teliphone Inc.
Teliphone Inc. will recognize the issuance of shares at the full value of the
services to be provided, which is Cdn$144,000.
Exhibit 23.3-Cosent of Independent Registered Public Accounting Firm
134. We note Schwartz Levitsky Feldman consented to the use of an audit
report that was not actually included in your registration
statement. Please revise to provide a current consent from Schwartz
Levitsky Feldman LLP for the audit report that is included in your
filing.
RESPONSE
We have updated the disclosure in the amended filing to provide a current
consent from Schwartz Levitsky Feldman LLP for the audit report that is included
in your filing.
Other Regulatory
135. Please note the updating requirements for the financial statements
as set forth in Item 310(g) of Regulation S-B and provide current
consents of the independent accountants in any amendments.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
40
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
We have updated the disclosure in the amended filing to provide a current
consent from Schwartz Levitsky Feldman LLP for the audit report that is included
in your filing.
Part II
Recent Sales of Unregistered Securities, Page II-2
136. In this section, please describe each transaction in which the
company has sold unregistered securities in the last three years as
required by Item 701 of Regulation S-B. For example, we note the
disclosure in Note 6 to the Condensed Consolidated Financial
Statements of OSK Capital II Corporation that on August 11, 2005,
the company entered into 10% convertible debentures with various
individuals. Please describe each issuance of securities, including
the names of the individuals, the exemption under the federal
securities laws and the facts relied upon to make the exemption
available.
RESPONSE
We have noted this comment and revised our disclosure.
137. For each of the transactions involving the issuance of the company's
restricted stock on August 18, 2006, please describe the facts
relied upon to make the exemption available. For example, financial
sophistication, general solicitation, etc.
RESPONSE
We have noted this comment and revised our disclosure to include the exemption.
138. For the shares which you have issued in exchange for services,
please disclose the type and extent of services the recipient of the
shares has provided.
RESPONSE
We have noted this comment and revised our disclosure.
139. Please explain the statement "[w]e likewise issued the following
securities on August 18, 2006 as restricted stock in order to
convert debt from our parent company United American Corporation
into common stock." Please describe the issuance of debt.
RESPONSE
We have noted this comment and revised our disclosure.
140. For the shares you have issued to your parent in return for debt,
disclose whether the parent or a subsidiary of the parent lent you
the money and disclose the amount of the debt you have repaid. Also
ensure that you include transactions in this regard in the certain
relationships section, as appropriate.
RESPONSE
We have noted this comment and revised our disclosure.
141. Please describe any issuance of the company's securities in
connection with the reverse merger of OSK Capital II with Teliphone
Inc.
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
41
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
We have noted this comment and revised our disclosure.
142. In this section, please describe the proposed spin-off and how the
transaction complies with each element of Staff Legal Bulletin No.
4. In particular, please describe whether the parent, United
American Corporation, has held the "restricted shares" of Teliphone
Corp. of Nevada for two years as required by SLB 4. We note the
disclosure in this section that the company issued its securities to
United American Corporation on August 18, 2006 as "restricted
stock". Please describe each transaction in which United American
Corp. acquired the 25,737,785 shares of the company's common stock
as disclosed on page 26. We may have further comment.
RESPONSE
In response to this comment, the Company discloses on a supplemental basis that
the spin-off complies with Staff Legal Bulletin No. 4 because it, as the
subsidiary, is registering the spun-off shares. This Registration Statement on
Form SB-2 has been amended to include the restricted shares issued in the
spin-off. The Company is in compliance with four of the elements in Staff Legal
Bulletin No. 4, but acknowledges that United American Corporation had not held
the spun-off securities for at least two years. For this reason, the Company has
included the spun-off shares in the Amended Registration Statement in compliance
with Staff Legal Bulletin No. 4. In response to this comment, the Company
discloses on a supplemental basis that the spin-off complies with Staff Legal
Bulletin No. 4 because it, as the subsidiary, is registering the spun-off
shares. This Registration Statement on Form SB-2 has been amended to include the
restricted shares issued in the spin-off. The Company is in compliance with four
of the elements in Staff Legal Bulletin No. 4, but acknowledges that United
American Corporation had not held the spun-off securities for at least two
years. For this reason, the Company has included the spun-off shares in the
Amended Registration Statement in compliance with Staff Legal Bulletin No. 4.
United American Corporation received their shares as part of the exchange for
all of the outstanding shares of stock of Teliphone, Inc
Exhibits
143. Please file as an exhibit a list of all your subsidiaries, the state
or other jurisdiction of incorporation or organization of each, and
the names under which such subsidiaries do business. See Item 601 of
Regulation S-B.
RESPONSE
We have noted this comment and added Exhibit 21: Subsidiaries.
144. Please comply fully with Item 601(a)(1)(10) of Regulation S-B
regarding the need to file material agreements. We note that you
have filed none of the several agreements which you have referenced
in the prospectus. Examples include the rental agreement and the
cash advance agreement between related companies, 3894517 Canada
Inc. and Teliphone Inc. See also Item 601(b)(10).
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
42
TELIPHONE CORP [teliPhone LOGO]
RESPONSE
We have noted this comment and have added all the referenced agreements as
exhibits.
145. We have reviewed the legality opinion. Please ask counsel to revise
as follows:
o Reference the state of Nevada exclusively, rather than sometimes
referencing the state of Delaware; and
o Please revise number three of the opinion if appropriate. The
prospectus provides conflicting disclosure as to whether the shares
are being offered by the company or by selling shareholders. Please
resolve this issue before counsel revises the opinion.
RESPONSE
We have noted this comment and had the legal opinion revised.
Signatures
146. George Metrakos should also sign as controller or principal
accounting officer. See "Instructions for Signatures" at the end of
Form SB-2.
RESPONSE
We have noted this comment and revised the disclosure.
Exchange Act Reports
147. Please review your current Form 10-KSB, forms 10-QSB, and other
Exchange Act Filings to comply with these comments as applicable.
RESPONSE
We have noted this comment and will revise current and future form 10-KSB and
10-QSB filings as applicable.
The Company hereby acknowledges that:
o The Company is responsible for the adequacy and accuracy of the disclosure
in the filings;
o Staff comments or changes to disclosure in response to staff comments do
not foreclose the Commission from talking any action with respect to the
fling; and
o the Company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
/s/ George Metrakos
- -------------------------------------
George Metrakos
President & CEO
Teliphone Corp.
Tel: 514-313-6010
e-mail: gmetrakos@teliphone.ca
Teliphone Corp.
4150 Ste-Catherine West, suite 200
Westmount (Montreal) Quebec, Canada H3Z 0A1
(514) 313-6000, 877 TELIPHONE
www.teliphone.ca
43