SEC Company Response from NATIONAL LAMPOON INC (CIK 0000798078) — May 31, 2005
NATIONAL LAMPOON INC (CIK 0000798078)
Date: May 31, 2005 · CIK: 0000798078 · Accession: 0001089355-05-000113
AI Filing Summary & Sentiment
File numbers found in text: 333-123238
Referenced dates: May 6, 2005
Letter
United States Securities and Exchange Commission Division of Corporation Finance National Lampoon, Inc. Form SB-2 filed March 10, 2005 File No. 333-123238 Our File No.: 1686-001
Dear Ms. Williams:
This letter is in response to your letter dated May 6, 2005 regarding the SB-2 Registration Statement (the “Registration Statement”) filed by National Lampoon, Inc. (the “Company”). The Company is also filing Pre-Effective Amendment No. 2 to the Registration Statement (the “Amendment”) with this letter.
Registration Statement Cover Page. We note in the fee registration table that you intend to register the common stock which may be purchased by the underwriters to cover over-allotments. We also note that you intend to register the warrants being issued to underwriters as additional compensation as well as the common stock underlying these warrants. However, we also note on page 4 that the amount of common stock outstanding after the offering does not include the shares of common stock reserved for issuance upon the exercise by the underwriters of the over-allotment option or the shares of common stock reserved for issuance upon exercise of the underwriter’s warrant. We also note your discussion in the underwriting section that you expect to register the common stock underlying the underwriters’ warrants at some point in the future. Please revise to clarify this discrepancy or advise why no revision is necessary.
In response to this comment, we deleted the underwriter’s warrants and the common stock underlying the warrants from the Registration Statement cover page. The Company’s letter of intent with the underwriter does not require the Company to register the warrants or the underlying common stock at this time.
Jennifer G. Williams, Special Counsel
United States Securities and Exchange Commission
May 31, 2005
Page 2
Prospectus Cover Page. We note you applied to list your common stock on the American Stock Exchange and on the Pacific Stock Exchange and plan to be so listed concurrently on one of these exchanges with the effectiveness of this offering. However, we also note in the risk factors on page 16 that you will have submitted applications to list the common stock offered by this prospectus to the American Stock Exchange and to the Pacific Stock Exchange as of the effective date of this offering. You also include the risk that there can be no assurance that your securities will be accepted for listing on one or both of these exchanges. Since it does not appear that your application will be approved upon the effectiveness of this offering, please remove this forward-looking information from the cover page or advise why this information should not be viewed as forward-looking.
In response to this comment, please note that the underwriter has agreed to undertake this offering on the condition that the Company is successful in listing its common stock on the American Stock Exchange, therefore, we have left the forward-looking information in the disclosure. The Company has decided not to apply to the Pacific Stock Exchange, so references to it have been deleted.
Inside Front and Outside Back Cover Pages of Prospectus. Provide the disclosure required by Item 602 of Regulation S-B.
In response to this comment, the Company has included the legend disclosing the prospectus delivery requirement on the inside front cover.
Inside Front and Outside Back Cover Pages of Prospectus. Remove from the back cover page of the prospectus the inference that information in this prospectus may be incorporated by reference. Information cannot be incorporated by reference into this prospectus.
The Company has moved this information to the inside front cover. The phrase “or incorporated by reference” has been deleted, as requested.
Summary, page 1. Please disclose your auditor’s note in its annual report that there is substantial doubt regarding your ability to continue as a going concern and briefly explain the reasons behind the auditor’s note.
In response to this comment, the Company has added a paragraph titled “Going Concern Status” on page 6 of the prospectus.
Motion Picture and Television Programming, page 1. Please explain your statement that you “produce” motion pictures and made for television movies and programs. It appears
Jennifer G. Williams, Special Counsel
United States Securities and Exchange Commission
May 31, 2005
Page 3
from your disclosure in the Business section that the extent of your involvement in recent motion pictures has been licensing the National Lampoon name. Revise to clarify the business activities you are currently involved in for motion pictures and television programming, other than National Lampoon Networks, here and other appropriate sections of the prospectus.
In response to this comment, the Company has changed the disclosure on pages 1 and 38. While the Company does not fund motion picture production, it provides other producer services and is frequently given executive producer credit.
Home Entertainment, page 1. We note your partnership with unrelated third parties to produce and distribute several new titles in 2005. Please identify the names of the unrelated third parties, if material. In addition, please revise to clarify your specific role in the partnership.
In response to this comment, the Company has revised the paragraph on page 2 to include the names of its partners and to disclose the services it provides.
Our Revenue Sources, page 2. Please quantify the percentage each of the seven sources of revenue you list contributes to your overall revenue, to the extent practicable. If some sources make little or no contribution, please state this. Make similar revisions to the MD&A section.
In response to this comment, the Company has revised the disclosure under this paragraph as you requested. The Company has also revised the MD&A to include this information. Please see pages 4 and 28.
Our Revenue Sources, page 2. Disclose in this section your operating revenue and losses for each reporting business segment for the most recent fiscal year and interim period.
In response to this comment, the Company has included a table at page 4, which provides the disclosure you requested.
Strategic Objectives, page 3. Please balance your disclosure concerning your strategic objectives with a brief discussion of the risks involved with implementing these plans. In addition, explain here or in the MD&A section the steps you have or plan to take to achieve these objectives, to the extent practicable.
In response to your comment, the Company has revised the disclosure under this heading. Please see page 5.
Jennifer G. Williams, Special Counsel
United States Securities and Exchange Commission
May 31, 2005
Page 4
Risk Factors, page 8. We have incurred losses in the past and losses may continue . . . page 8. We note your disclosure concerning your losses for the fiscal year 2004 and first quarter of 2005. Update this disclosure to include your second quarter 2005 losses. Also consider disclosing the company’s longstanding unprofitability and state the last quarter/year you turned a profit.
In response to this comment, the risk factor disclosure has been revised to include the information you requested. Please see page 11.
Risk Factors, page 8. We may be unable to meet our future capital requirements . . . page 8. Please revise to briefly explain here and provide more detail in your MD&A section how you expect to rely on “anticipated cash flow from operations” to meet your working capital and capital expenditure requirements in the coming 24 months. We note on page 34 that your operations have been characterized by ongoing capital shortages caused by expenditures related to the initiation of several new business activities. We also note from the statement of cash flows that you have not had positive cash flows from operations for at least the past three years. Please revise accordingly.
The Company has revised the disclosure related to its cash flow in this section and in the MD&A. Please see pages 11 and 34.
Risk Factors, page 8. In addition, please consider disclosing your burn rate.
The Company believes that disclosing its burn rate would not accurately reflect the cash requirements of its operations, because there were significant non-recurring expenses related to the reorganization transaction that occurred in May 2002 and to Mr. Jimirro’s separation from service in February 2005. Based on the foregoing, the Company does not believe that the historical burn rate will be meaningful to investors and for this reason, no revision has been made.
Risk Factors, page 8. We depend on a small number of relationships for most of our revenues, page 10. We note you expect to depend on a relatively small number of relationships for a majority of your revenue in the near term. Please file all material contracts as exhibits to this registration statement in accordance with Item 601(b)(10) of Regulation S-B. In this regard, we note your significant relationships with Warner Bros., The Trouble With Frank, and AMC Entertainment, Inc.
In response to this comment, the Company has filed its agreements with Warner Bros. Inc., TTWF, LLC and American Movie Classic Company, along with its agreement with
Jennifer G. Williams, Special Counsel
United States Securities and Exchange Commission
May 31, 2005
Page 5
Majestic Entertainment and intends to file the NL Radio, LLC Operating Agreement and license as exhibits, as you requested. Please note that the Company intends to file a request for confidential treatment in conjunction with several of these agreements.
Risk Factors, page 8. If a significant amount of comedic content . . . page 12. We note that much of your content is provided by third parties at minimal or no charge. In addition, we also note that you or your subsidiary have no long-term contracts with your content providers. Amplify these business arrangements, including the reasons for such arrangements, in the Business section.
The Company has revised the Business section to include the information you requested. Please see page 40.
Management’s Discussion and Analysis, page 27. Overview, page 27. Explain the basis for your statement that “[w]e believe that the National Lampoon brand is one of the strongest brands in media.” We note your statement on page 42 that you do not represent a significant presence in the entertainment industry.
In response to this comment, the Company has revised its disclosure in the MD&A at page 28. While the Company believes its brand is nationally recognized and has survey data to confirm that its brand is recognized by approximately 96% of college males, it earns significantly less in revenues than major studios and television networks.
Six Months Ended January 31, 2005 . . . . page 30. Consider revising your disclosure under separate subheadings to help the investor clearly understand the revenues and costs associated with each of your business segments.
In response to this comment, the Company has revised this disclosure as you suggested. Please see pages 31 and 32.
Six Months Ended January 31, 2005 . . . . page 30. Revise to explain the reason for the “decreased activity in the production of National Lampoon Network programming” for the six months ended January 31, 2005. For example, please explain the factors that led to a 62% decrease in costs associated with production revenue compared to the similar 2004 period. To the extent you are winding down your NLN programming business, you should disclose that clearly here, and make necessary revisions deemphasizing this line of business in other parts of the document.
In response to this comment, the Company has revised this disclosure at page 32.
Jennifer G. Williams, Special Counsel
United States Securities and Exchange Commission
May 31, 2005
Page 6
Liquidity and Capital Resources, page 33. We note you list trademark income, advertising and sponsorship revenues as principal sources of working capital. However, we also note in your statement of cash flows that you currently have a negative cash flow from operations. Please revise to clarify this discrepancy or advise why no revision is necessary.
As we indicated in response to your comment 12, the Company has revised the disclosure concerning its working capital. Please see page 34.
Business, page 38. Motion Picture and Feature Film, page 39. We note that you describe a variety of fee and profit arrangements you have with production companies. To the extent material, please quantify or show as a percentage the number of arrangements you currently have by fee and /or profit type.
As requested, the Company has included this information in the discussion. Please see page 39.
Television Production, page 40. Please explain what a “first-look” agreement is.
A “first look” agreement allows a studio or production company, for a short period of time, to look at and agree to produce programming – in this case programming created by the Company – before the Company may offer it to other studio or production companies. We have deleted the discussion relating to the “first look” agreement because it has expired.
Intellectual Property, page 42. Given the importance of the National Lampoon mark, provide additional detail regarding the terms of your contract with Harvard Lampoon, Inc., who actually owns the National Lampoon trademark, and the protection afforded by trademarks in general.
The Company has expanded the discussion of its agreement with Harvard Lampoon, Inc., as you requested. Please see page 42.
Legal Proceedings, page 43. Disclose the amount of the Trustin Howard claim. Refer to Item 103 of Regulation S-B.
The legal action involving Mr. Howard has been settled, so we have deleted the information relating to it. The Company was not required to pay anything towards the settlement.
Management, page 44. General. Please disclose the material terms of James P. Jimirro’s employment agreement, including the contingent liabilities that you are currently obligated
Jennifer G. Williams, Special Counsel
United States Securities and Exchange Commission
May 31, 2005
Page 7
to provide Mr. Jimirro under this agreement. In the appropriate section, please disclose the material terms of the termination of security agreement dated January 28, 2005 between Mr. Jimirro and your company.
As we discussed with Mr. Mat Bazley, we have included the terms of Mr. Jimirro’s employment agreement in the discussion titled “Certain Relationships and Related Party Transactions” at page 49. The Company has no further obligation to Mr. Jimirro, either under his employment agreement or under the Security Agreement.
Business Experience, page 45. Delete the references to “OTCBB:OBDE”, “NYSE:AGI” and NASDAQ:RENT”.
The Company has made these deletions, as you requested. Please see page 45.
Business Experience, page 45. Please disclose the date of employment for Richard Irvine.
The Company has revised Mr. Irvine’s biography, as you requested. Please see page 45.
Executive Compensation, page 47. We note Mr. Jimirro has retired as your Chief Executive Officer although he still acts as Chairman of your board of directos. However, we also note on page 51, it appears you classify Mr. Jimirro’s re
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RICHARDSON & PATEL LLP
10900 Wilshire Boulevard
Suite 500
Los Angeles, California 90024
Telephone (310) 208-1182
Facsimile (310) 208-1154
May 31, 2005
VIA FEDERAL EXPRESS
Jennifer G.
Williams, Special Counsel
United States Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20548
Re:
National
Lampoon, Inc.
Form SB-2 filed March 10, 2005
File No. 333-123238
Our File No.: 1686-001
Dear Ms.
Williams:
This
letter is in response to your letter dated May 6, 2005 regarding the SB-2
Registration Statement (the “Registration Statement”) filed by National
Lampoon, Inc. (the “Company”). The
Company is also filing Pre-Effective Amendment No. 2 to the Registration
Statement (the “Amendment”) with this letter.
Registration Statement Cover Page. We note in the fee registration table that
you intend to register the common stock which may be purchased by the
underwriters to cover over-allotments.
We also note that you intend to register the warrants being issued to
underwriters as additional compensation as well as the common stock underlying
these warrants. However, we also note
on page 4 that the amount of common stock outstanding after the offering does
not include the shares of common stock reserved for issuance upon the exercise
by the underwriters of the over-allotment option or the shares of common stock
reserved for issuance upon exercise of the underwriter’s warrant. We also note your discussion in the underwriting
section that you expect to register the common stock underlying the
underwriters’ warrants at some point in the future. Please revise to clarify this discrepancy or advise why no
revision is necessary.
In
response to this comment, we deleted the underwriter’s warrants and the common
stock underlying the warrants from the Registration Statement cover page. The Company’s letter of intent with the
underwriter does not require the Company to register the warrants or the
underlying common stock at this time.
Jennifer G.
Williams, Special Counsel
United States Securities and Exchange Commission
May 31, 2005
Page 2
Prospectus Cover Page. We note you applied to list your common
stock on the American Stock Exchange and on the Pacific Stock Exchange and plan
to be so listed concurrently on one of these exchanges with the effectiveness
of this offering. However, we also note
in the risk factors on page 16 that you will have submitted applications to
list the common stock offered by this prospectus to the American Stock Exchange
and to the Pacific Stock Exchange as of the effective date of this
offering. You also include the risk
that there can be no assurance that your securities will be accepted for
listing on one or both of these exchanges.
Since it does not appear that your application will be approved upon the
effectiveness of this offering, please remove this forward-looking information
from the cover page or advise why this information should not be viewed as
forward-looking.
In
response to this comment, please note that the underwriter has agreed to
undertake this offering on the condition that the Company is successful in
listing its common stock on the American Stock Exchange, therefore, we have
left the forward-looking information in the disclosure. The Company has decided not to apply to the
Pacific Stock Exchange, so references to it have been deleted.
Inside Front and Outside Back Cover Pages of
Prospectus.
Provide the disclosure required by Item 602 of Regulation S-B.
In
response to this comment, the Company has included the legend disclosing the
prospectus delivery requirement on the inside front cover.
Inside Front and Outside Back Cover Pages of
Prospectus.
Remove from the back cover page of the prospectus the inference that
information in this prospectus may be incorporated by reference. Information cannot be incorporated by
reference into this prospectus.
The
Company has moved this information to the inside front cover. The phrase “or incorporated by reference”
has been deleted, as requested.
Summary, page 1. Please disclose your auditor’s note in its
annual report that there is substantial doubt regarding your ability to
continue as a going concern and briefly explain the reasons behind the
auditor’s note.
In
response to this comment, the Company has added a paragraph titled “Going
Concern Status” on page 6 of the prospectus.
Motion Picture and Television Programming,
page 1. Please
explain your statement that you “produce” motion pictures and made for
television movies and programs. It
appears
Jennifer G.
Williams, Special Counsel
United States Securities and Exchange Commission
May 31, 2005
Page 3
from your disclosure in the Business section
that the extent of your involvement in recent motion pictures has been licensing
the National Lampoon name. Revise to
clarify the business activities you are currently involved in for motion
pictures and television programming, other than National Lampoon Networks, here
and other appropriate sections of the prospectus.
In
response to this comment, the Company has changed the disclosure on pages 1 and
38. While the Company does not fund
motion picture production, it provides other producer services and is
frequently given executive producer credit.
Home Entertainment, page 1. We note your partnership with unrelated
third parties to produce and distribute several new titles in 2005. Please identify the names of the unrelated
third parties, if material. In
addition, please revise to clarify your specific role in the partnership.
In
response to this comment, the Company has revised the paragraph on page 2 to
include the names of its partners and to disclose the services it provides.
Our Revenue Sources, page 2. Please quantify the percentage each of the
seven sources of revenue you list contributes to your overall revenue, to the
extent practicable. If some sources
make little or no contribution, please state this. Make similar revisions to the MD&A section.
In
response to this comment, the Company has revised the disclosure under this
paragraph as you requested. The Company
has also revised the MD&A to include this information. Please see pages 4 and 28.
Our Revenue Sources, page 2. Disclose in this section your operating
revenue and losses for each reporting business segment for the most recent
fiscal year and interim period.
In
response to this comment, the Company has included a table at page 4, which
provides the disclosure you requested.
Strategic Objectives, page 3. Please balance your disclosure concerning
your strategic objectives with a brief discussion of the risks involved with
implementing these plans. In addition,
explain here or in the MD&A section the steps you have or plan to take to
achieve these objectives, to the extent practicable.
In
response to your comment, the Company has revised the disclosure under this
heading. Please see page 5.
Jennifer G.
Williams, Special Counsel
United States Securities and Exchange Commission
May 31, 2005
Page 4
Risk Factors, page 8. We have incurred losses in the past and
losses may continue . . . page 8. We
note your disclosure concerning your losses for the fiscal year 2004 and first
quarter of 2005. Update this disclosure
to include your second quarter 2005 losses.
Also consider disclosing the company’s longstanding unprofitability and
state the last quarter/year you turned a profit.
In
response to this comment, the risk factor disclosure has been revised to
include the information you requested.
Please see page 11.
Risk Factors, page 8. We may be unable to meet our future capital
requirements . . . page 8. Please
revise to briefly explain here and provide more detail in your MD&A section
how you expect to rely on “anticipated cash flow from operations” to meet your
working capital and capital expenditure requirements in the coming 24
months. We note on page 34 that your
operations have been characterized by ongoing capital shortages caused by
expenditures related to the initiation of several new business activities. We also note from the statement of cash
flows that you have not had positive cash flows from operations for at least
the past three years. Please revise
accordingly.
The
Company has revised the disclosure related to its cash flow in this section and
in the MD&A. Please see pages 11
and 34.
Risk
Factors, page 8. In
addition, please consider disclosing your burn rate.
The
Company believes that disclosing its burn rate would not accurately reflect the
cash requirements of its operations, because there were significant
non-recurring expenses related to the reorganization transaction that occurred
in May 2002 and to Mr. Jimirro’s separation from service in February 2005. Based on the foregoing, the Company does not
believe that the historical burn rate will be meaningful to investors and for
this reason, no revision has been made.
Risk Factors, page 8. We depend on a small number of relationships
for most of our revenues, page 10. We
note you expect to depend on a relatively small number of relationships for a
majority of your revenue in the near term.
Please file all material contracts as exhibits to this registration
statement in accordance with Item 601(b)(10) of Regulation S-B. In this regard, we note your significant
relationships with Warner Bros., The Trouble With Frank, and AMC Entertainment,
Inc.
In
response to this comment, the Company has filed its agreements with Warner
Bros. Inc., TTWF, LLC and American Movie Classic Company, along with its
agreement with
Jennifer G.
Williams, Special Counsel
United States Securities and Exchange Commission
May 31, 2005
Page 5
Majestic
Entertainment and intends to file the NL Radio, LLC Operating Agreement and license as
exhibits, as you requested. Please note
that the Company intends to file a request for confidential treatment in
conjunction with several of these agreements.
Risk Factors, page 8. If a significant amount of comedic content .
. . page 12. We note that much of your
content is provided by third parties at minimal or no charge. In addition, we also note that you or your
subsidiary have no long-term contracts with your content providers. Amplify these business arrangements,
including the reasons for such arrangements, in the Business section.
The
Company has revised the Business section to include the information you
requested. Please see page 40.
Management’s Discussion and Analysis, page 27. Overview, page 27. Explain the basis for your statement that “[w]e believe that the
National Lampoon brand is one of the strongest brands in media.” We note your statement on page 42 that you
do not represent a significant presence in the entertainment industry.
In
response to this comment, the Company has revised its disclosure in the
MD&A at page 28. While the Company
believes its brand is nationally recognized and has survey data to confirm that
its brand is recognized by approximately 96% of college males, it earns
significantly less in revenues than major studios and television networks.
Six Months Ended January 31, 2005 . . . .
page 30.
Consider revising your disclosure under separate subheadings to help the
investor clearly understand the revenues and costs associated with each of your
business segments.
In
response to this comment, the Company has revised this disclosure as you
suggested. Please see pages 31 and 32.
Six Months Ended January 31, 2005 . . . .
page 30.
Revise to explain the reason for the “decreased activity in the
production of National Lampoon Network programming” for the six months ended
January 31, 2005. For example, please
explain the factors that led to a 62% decrease in costs associated with
production revenue compared to the similar 2004 period. To the extent you are winding down your NLN
programming business, you should disclose that clearly here, and make necessary
revisions deemphasizing this line of business in other parts of the document.
In
response to this comment, the Company has revised this disclosure at page
32.
Jennifer G.
Williams, Special Counsel
United States Securities and Exchange Commission
May 31, 2005
Page 6
Liquidity and Capital Resources, page 33. We note you list trademark income,
advertising and sponsorship revenues as principal sources of working
capital. However, we also note in your
statement of cash flows that you currently have a negative cash flow from
operations. Please revise to clarify
this discrepancy or advise why no revision is necessary.
As
we indicated in response to your comment 12, the Company has revised the
disclosure concerning its working capital.
Please see page 34.
Business, page 38. Motion Picture and Feature Film, page 39. We note that you describe a variety of fee
and profit arrangements you have with production companies. To the extent material, please quantify or
show as a percentage the number of arrangements you currently have by fee and
/or profit type.
As
requested, the Company has included this information in the discussion. Please see page 39.
Television Production, page 40. Please explain what a “first-look” agreement
is.
A
“first look” agreement allows a studio or production company, for a short
period of time, to look at and agree to produce programming – in this case
programming created by the Company – before the Company may offer it to other
studio or production companies. We have
deleted the discussion relating to the “first look” agreement because it has expired.
Intellectual Property, page 42. Given the
importance of the National Lampoon mark, provide additional detail regarding
the terms of your contract with Harvard Lampoon, Inc., who actually owns the
National Lampoon trademark, and the protection afforded by trademarks in
general.
The
Company has expanded the discussion of its agreement with Harvard Lampoon,
Inc., as you requested. Please see page
42.
Legal Proceedings, page 43. Disclose the amount of the Trustin Howard
claim. Refer to Item 103 of Regulation
S-B.
The
legal action involving Mr. Howard has been settled, so we have deleted the information
relating to it. The Company was not
required to pay anything towards the settlement.
Management, page 44. General. Please disclose the material terms of James
P. Jimirro’s employment agreement, including the contingent liabilities that
you are currently obligated
Jennifer G.
Williams, Special Counsel
United States Securities and Exchange Commission
May 31, 2005
Page 7
to provide Mr. Jimirro under this
agreement. In the appropriate section,
please disclose the material terms of the termination of security agreement
dated January 28, 2005 between Mr. Jimirro and your company.
As
we discussed with Mr. Mat Bazley, we have included the terms of Mr. Jimirro’s
employment agreement in the discussion titled “Certain Relationships and Related
Party Transactions” at page 49. The
Company has no further obligation to Mr. Jimirro, either under his employment
agreement or under the Security Agreement.
Business Experience, page 45. Delete the references to “OTCBB:OBDE”,
“NYSE:AGI” and NASDAQ:RENT”.
The
Company has made these deletions, as you requested. Please see page 45.
Business Experience, page 45. Please disclose the date of employment for
Richard Irvine.
The
Company has revised Mr. Irvine’s biography, as you requested. Please see page 45.
Executive Compensation, page 47. We note Mr. Jimirro has retired as your
Chief Executive Officer although he still acts as Chairman of your board of
directos. However, we also note on page
51, it appears you classify Mr. Jimirro’s re