SEC Company Response from NETGURU INC (CIK 0001015920) — Jul 21, 2005
NETGURU INC (CIK 0001015920)
Date: July 21, 2005 · CIK: 0001015920 · Accession: 0001019687-05-002019
AI Filing Summary & Sentiment
File numbers found in text: 333-100651, 333-112181, 333-124920
Referenced dates: December 23, 2004, June 10, 2005
Letter
VIA DHL AND EDGAR CORRESPONDENCE -------------------------------------- Mark P. Shuman Branch Chief-Legal Division of Corporation Finance Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2004 FORMS 8-K FILED DECEMBER 30, 2004 FILE NO. 0-28560 -----------------------------------------------------
RE: NETGURU, INC. REGISTRATION STATEMENT ON FORM S-3 FILED MAY 13, 2005 FILE NO. 333-124920
Dear Mr. Shuman:
This letter responds to your letter of comments dated June 10, 2005. The comments contained in your letter are set forth below in their entirety for your convenience.
Enclosed are clean and marked versions to show changes reflected in our Amendment No. 1 to our registration statement on Form S-3 ("Form S-3/A"). We have Indicated below where disclosure in response to your comments has been included in the Form S-3/A or the reasons why we believe such disclosure is inapplicable or inappropriate. The page numbers referenced below correspond to the clean version of the enclosed document.
General -------
1. WE NOTE THAT YOUR AUDITED BALANCE SHEET AND AUDITED STATEMENTS OF INCOME AND CASH FLOW ARE AS OF AND FOR THE YEAR ENDED MARCH 31, 2004. PURSUANT TO ITEM 310(g) OF REGULATION S-B, YOUR REGISTRATION STATEMENT MUST INCLUDE AUDITED FINANCIAL STATEMENTS FOR THE MOST RECENT FISCAL YEAR. PLEASE REFILE YOUR REGISTRATION STATEMENT WITH APPROPRIATE FINANCIAL STATEMENTS AND REVISE YOUR DISCLOSURE AS NECESSARY.
<PAGE>
Mark P. Shuman July 21, 2005 Page 2
The Form S-3/A has been updated throughout to include information from or relating to our audited financial statements for our most recent fiscal year, which ended March 31, 2005.
2. IN SECTION 3.2 IN EACH OF THE SECURITIES PURCHASE AGREEMENTS DATED DECEMBER 23, 2004 AND DECEMBER 4, 2003, REFERENCE IS MADE TO AN ESCROW AGREEMENT. PLEASE PROVIDE US COPIES OF THE AGREEMENTS AND IN YOUR RESPONSE LETTER EXPLAIN THE PURPOSE AND EFFECT OF SUCH AGREEMENTS. TELL US WHY THESE ESCROW AGREEMENTS WERE NOT FILED AS EXHIBITS TO THE FORM 8-K FILED DECEMBER 30, 2004 OR YOUR FORM S-3 FILED JANUARY 26, 2004, AS APPLICABLE. PROVIDE US WITH A COPY OF ANY OTHER AGREEMENTS BETWEEN NETGURU, LAURUS MASTER FUND AND ANY THIRD PARTIES CONCERNING THE NOTES AND WARRANTS SOLD ON DECEMBER 23, 2004 AND DECEMBER 4, 2003, THAT WERE NOT FILED WITH THE FORM 8-K OR FORM S-3, RESPECTIVELY. TELL US THE AMOUNT CONVEYED BY LAURUS MASTER FUND TO NETGURU IN PAYMENT FOR THE NOTES AND WHEN AND HOW THOSE FUNDS WERE TRANSFERRED. DESCRIBE THE FUNCTION OF THE ESCROW AGREEMENT, ESCROW AGENT OR OTHER PARTIES IN THIS PROCESS.
We have enclosed copies of the escrow agreements that were referred to in the securities purchase agreements dated December 23, 2004 and December 4, 2003. Besides the escrow agreements, there are no other agreements with Laurus concerning the December 2003 and December 2004 private placements that were not filed as exhibits. The purpose and effect of the escrow agreements was to have a third-party act as escrow agent to collect the funds from Laurus Master Fund and to collect all necessary executed agreements from Laurus Master Fund and us prior to the release of funds and the exchange of the executed agreements pursuant to the securities purchase agreements. The escrow agent disbursed the funds as instructed by a disbursement letter, which included the disbursement of any fees in connection with the securities purchase agreements.
We have also included for your review the disbursement letters dated December 23, 2004 and December 4, 2003 executed by both Laurus Master Fund and us for release of the funds from the escrow agent. These escrow agreements were not filed as exhibits to the Form 8-K filed December 30, 2004 or the Form S-3 filed January 26, 2004 as we did not consider them to be material agreements and the escrow terminated upon the closing of the two transactions.
On December 4, 2003, Laurus Master Fund conveyed $500,000 for payment of the 2003 convertible note. Upon receipt of disbursement instructions from both Laurus Master Fund and us, the escrow agent disbursed the funds via wire transfer as follows: 1.) $484,500 to us; 2.) $10,000 to Laurus Capital Management, L.L.C. as closing fees; 3.) $5,000 to Laurus Capital Management, L.L.C. as reimbursement of legal fees and due diligence expenses; and 4.) $500 to Dechert LLP as an escrow agent fee.
<PAGE>
Mark P. Shuman July 21, 2005 Page 3
On December 23, 2004, Laurus Master Fund conveyed $1,000,000 for payment of the 2004 convertible note. Upon receipt of disbursement instructions from both Laurus and us, the escrow agent disbursed the funds via wire transfer as follows: 1.) $989,500 to us; 2.) $5,000 to Laurus Capital Management, L.L.C. for management fees; 3.) $5,000 to Laurus Capital Management, L.L.C. for reimbursement of due diligence and documentation fees; and 4.) $500 to Loeb & Loeb, LLP as an escrow agent fee.
Selling Security Holders ------------------------
Selling Security Holders Table, p. 16 -------------------------------------
3. PLEASE DISCLOSE THE NATURAL PERSONS WHO EXERCISE THE VOTING AND/OR DISPOSITIVE POWERS WITH RESPECT TO THE SECURITIES TO BE OFFERED FOR RESALE BY YOUR SELLING SECURITYHOLDERS THAT DO NOT FILE PERIODIC REPORTS UNDER THE EXCHANGE ACT. WE NOTE THAT CERTAIN SELLING SECURITYHOLDERS, SUCH AS GRAL, DO NOT DISCLOSE THE INDIVIDUALS WHO EXERCISE THESE POWERS. PLEASE SEE INTERPRETATION I.60 OF OUR JULY 1997 MANUAL OF PUBLICLY AVAILABLE TELEPHONE INTERPRETATIONS AND INTERPRETATION 4S OF THE REGULATION S-K PORTION OF THE MARCH 1999 SUPPLEMENT TO OUR JULY 1997 MANUAL OF PUBLICLY AVAILABLE TELEPHONE INTERPRETATIONS.
The footnotes to the selling security holder table at pages 17 and 18 of the Form S-3/A have been updated and revised to disclose the natural persons who exercise voting and/or dispositive power over shares held by each selling security holder.
4. PLEASE DISCLOSE WHETHER ANY SELLING SECURITYHOLDER IS A REGISTERED BROKER-DEALER. IF A SELLING SECURITYHOLDER IS A REGISTERED BROKER-DEALER, PLEASE IDENTIFY SUCH REGISTERED BROKER-DEALER AS AN UNDERWRITER IN YOUR DISCLOSURE, UNLESS THE SHARES WERE ACQUIRED AS TRANSACTION-BASED COMPENSATION FOR INVESTMENT-BANKING SERVICES. PROVIDE A DESCRIPTION OF THE INVESTMENT-BANKING SERVICES AND THE MANNER IN WHICH THE COMPENSATION FOR THE SERVICES WAS COMPUTED, AS APPLICABLE. WE NOTE THAT YOU HAVE IDENTIFIED THE SEIDLER COMPANIES AND FIRST MONTAUK SECURITIES AS REGISTERED BROKER-DEALERS.
The descriptions under the heading "Other Selling Security Holders" at pages 26 and 27 of the Form S-3/A have been revised to provide the requested information. As we discussed with Mr. Daniel Lee, each of the registered broker-dealers acquired the securities it is offering as compensation for services based on their investment banking expertise, and therefore, none has been named an underwriter.
<PAGE>
Mark P. Shuman July 21, 2005 Page 4
5. PLEASE DISCLOSE WHETHER ANY SELLING SECURITYHOLDER IS AN AFFILIATE OF A REGISTERED BROKER-DEALER. IF A SELLING SECURITYHOLDER IS AN AFFILIATE OF A REGISTERED BROKER-DEALER, PLEASE EXPAND THE PROSPECTUS DISCLOSURE TO INDICATE WHETHER SUCH SELLING SECURITYHOLDER ACQUIRED THE SECURITIES TO BE RESOLD IN THE ORDINARY COURSE OF BUSINESS. ALSO INDICATE WHETHER AT THE TIME OF THE ACQUISITION SUCH SELLING SECURITYHOLDER HAD ANY AGREEMENTS, UNDERSTANDINGS OR ARRANGEMENTS WITH ANY OTHER PERSONS, EITHER DIRECTLY OR INDIRECTLY, TO DISPOSE OF THE SECURITIES.
The descriptions under the heading "Other Selling Security Holders" at pages 26 and 27 of the Form S-3/A have been revised to provide the requested information.
Private Placements Through which the Selling Security Holders... ----------------------------------------------------------------
Laurus Master Fund. Ltd. Strategic Financings. p. 19 ----------------------------------------------------
6. PLEASE ADVISE US OF THE REASON FOR AMENDING AND RESTATING YOUR DECEMBER 2003 NOTE. TELL US THE NATURE OF THE CHANGES THAT AFFECTED THE ECONOMICS OF THE CREDITOR-DEBTOR RELATIONSHIP, IN ADDITION TO THE INCREASE IN THE MONTHLY PAYMENT AMOUNTS. FOR EXAMPLE, IF THE CONVERSION RIGHTS OF THE NOTEHOLDER WERE MODIFIED, PLEASE DESCRIBE THE CHANGE. IN YOUR RESPONSE LETTER, PLEASE DESCRIBE ALL SIGNIFICANT CHANGES TO THE NOTE WHEN IT WAS AMENDED AND RESTATED ON APRIL 27, 2004. PLEASE ADVISE WHETHER AND, IF SO, WHEN SHARES WERE ISSUED AND RESOLD PURSUANT TO THE PRIOR REGISTRATION STATEMENT.
The Company amended and restated the December 2003 convertible note to reflect an additional $1,000,000 that the Company borrowed on April 27, 2004, which the Company used for working capital. The amount of monthly principal payment was increased from $30,000 to $50,000 and the terminal payment changed from $440,000 to $710,000. Also, the initial repayment date was changed from April 1, 2004 to August 1, 2004. These are the most significant changes and are described at page 23 of the Form S-3/A.
A total of 368,462 shares were issued and resold pursuant to the prior registration statement: 200,000 shares were issued on April 5, 2004 and sold between April 19, 2004 and April 28, 2004; 80,000 shares were issued and sold on December 8, 2004 and 88,462 shares were issued and sold on December 27, 2004.
Other Selling Security Holders. p. 26 -------------------------------------
7. WE NOTE YOUR DISCLOSURE REGARDING THE ISSUANCE OF WARRANTS TO J.P. TURNER AND COMPANY, THE SEIDLER COMPANIES AND SILVERMAN HELLER ASSOCIATES AS PARTIAL CONSIDERATION FOR STRATEGIC INVESTOR RELATIONS' SERVICES. PLEASE ELABORATE TO DISCUSS HOW SUCH WARRANTS ONLY REPRESENTED PARTIAL CONSIDERATION FOR SUCH SERVICES.
<PAGE>
Mark P. Shuman July 21, 2005 Page 5
The descriptions under the heading "Other Selling Security Holders" at pages 26 and 27 of the Form S-3/A have been revised to provide the requested information.
8. PLEASE PROVIDE ADDITIONAL CONTEXT IN YOUR DISCLOSURE FOR THE TRANSACTIONS IN WHICH YOUR SELLING SECURITYHOLDERS OBTAINED THEIR SECURITIES. FOR EXAMPLE, PLEASE ELABORATE ON THE SETTLEMENT AGREEMENT WITH GRAL AND THE FINANCING AGREEMENT WITH MR. KELLOGG AS WELL AS PROVIDE ADDITIONAL DETAIL ON THE SERVICES MR. NIWAYAMA AND CERTAIN OF YOUR OPTIONEES PROVIDED TO YOU.
The descriptions under the heading "Other Selling Security Holders" at pages 26 and 27 of the Form S-3/A have been revised to provide the requested information.
Plan of Distribution --------------------
9. WE NOTE YOUR REFERENCE TO AGREEMENTS BY CERTAIN SELLING SECURITYHOLDERS IN WHICH THEY HAVE AGREED TO CERTAIN RESTRICTIONS ON THEIR RESALE OF SHARES OF YOUR COMMON STOCK. PLEASE FILE SUCH AGREEMENTS AS EXHIBITS TO YOUR REGISTRATION STATEMENT.
The restriction on sale of shares of our common stock by J.P. Turner & Company, LLC is contained in paragraph no. 8 of the common stock purchase warrant that is listed as Exhibit 4.14 to the Form S-3/A and is incorporated by reference from exhibit 4.6 to the registration statement on Form S-3 (file no. 333-112181) that was filed with the SEC on January 26, 2004.
The restriction on sale of shares of our common stock by The Seidler Companies, Incorporated is contained in paragraph no. 8 of the common stock purchase warrant that is listed as Exhibit 4.15 to the Form S-3/A and is incorporated by reference from exhibit 4.7 to the registration statement on Form S-3 (file no. 333-112181) that was filed with the SEC on January 26, 2004.
The restriction on sale of shares of our common stock by Silverman Heller Associates is contained in paragraph no. 8 of the common stock purchase warrant that is listed as Exhibit 4.16 to the Form S-3/A and is incorporated by reference from exhibit 4.8 to the registration statement on Form S-3 (file no. 333-112181) that was filed with the SEC on January 26, 2004.
The restriction on sale of shares of our common stock by Mr. Niwayama is contained in paragraph no. 2 of the stock compensation agreement that is listed as Exhibit 4.20 to the Form S-3/A and is incorporated by reference from exhibit 4.3 to the registration statement on Form S-3 (file no. 333-100651) that was filed with the SEC on October 21, 2002.
<PAGE>
Mark P. Shuman July 21, 2005 Page 6
Item 16. Exhibits -----------------
10. PURSUANT TO ITEM 601(B) OF REGULATION S-K, PLEASE ENSURE THAT YOU HAVE FILED ALL NECESSARY EXHIBITS IN THIS REGISTRATION STATEMENT INCLUDING OPINIONS AND MATERIAL AGREEMENTS, SUCH AS OUTSTANDING WARRANTS AND AGREEMENTS REMAINING TO BE PERFORMED AT OR AFTER THE FILING OF YOUR REGISTRATION STATEMENT, E.G., AGREEMENTS WITH CONTINUING REGISTRATION RIGHTS. PLEASE NOTE THAT RULE 429(B) UNDER THE SECURITIES ACT STATES THAT THIS REGISTRATION STATEMENT SHALL ACT AS A POST EFFECTIVE AMENDMENT TO THE PRIOR REGISTRATION STATEMENTS WHOSE PROSPECTUSES HAVE BEEN COMBINED IN THIS REGISTRATION STATEMENT. AS A RESULT, ALL NECESSARY EXHIBITS RELATING TO SHARES REGISTERED IN PRIOR REGISTRATION STATEMENTS SHOULD BE REFERENCED IN THE EXHIBIT INDEX AND INCORPORATED BY REFERENCE FROM THE PRIOR FILING, OR SHOULD BE FILED WITH THIS REGISTRATION STATEMENT.
The exhibit index contained at pages II-2 to II-4 of the Form S-3/A has been revised to list all necessary exhibits relating to shares registered in the current and prior registration statements. Pursuant to the request of Mr. Daniel Lee, the new legal opinion attached as Exhibit 5.1 covers the 3,845,078 shares being newly registered on this Form S-3 and the 2,127,787 shares being carried forward from Registration Statement No. 333-112181 with regard to the December 2003 convertible note.
We trust the foregoing is responsive to your comments. If I may be of further assistance, please call me at (714) 974-2500.
Sincerely yours,
NETGURU, INC.
Show Raw Text
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<PAGE>
[netGuru letterhead]
--------------------
JULY 21, 2005
VIA DHL AND EDGAR CORRESPONDENCE
--------------------------------------
Mark P. Shuman
Branch Chief-Legal
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: NETGURU, INC.
REGISTRATION STATEMENT ON FORM S-3 FILED MAY 13, 2005
FILE NO. 333-124920
FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2004
FORMS 8-K FILED DECEMBER 30, 2004
FILE NO. 0-28560
-----------------------------------------------------
Dear Mr. Shuman:
This letter responds to your letter of comments dated June 10, 2005.
The comments contained in your letter are set forth below in their entirety for
your convenience.
Enclosed are clean and marked versions to show changes reflected in our
Amendment No. 1 to our registration statement on Form S-3 ("Form S-3/A"). We
have Indicated below where disclosure in response to your comments has been
included in the Form S-3/A or the reasons why we believe such disclosure is
inapplicable or inappropriate. The page numbers referenced below correspond to
the clean version of the enclosed document.
General
-------
1. WE NOTE THAT YOUR AUDITED BALANCE SHEET AND AUDITED STATEMENTS OF
INCOME AND CASH FLOW ARE AS OF AND FOR THE YEAR ENDED MARCH 31, 2004.
PURSUANT TO ITEM 310(g) OF REGULATION S-B, YOUR REGISTRATION STATEMENT
MUST INCLUDE AUDITED FINANCIAL STATEMENTS FOR THE MOST RECENT FISCAL
YEAR. PLEASE REFILE YOUR REGISTRATION STATEMENT WITH APPROPRIATE
FINANCIAL STATEMENTS AND REVISE YOUR DISCLOSURE AS NECESSARY.
<PAGE>
Mark P. Shuman
July 21, 2005
Page 2
The Form S-3/A has been updated throughout to include information from
or relating to our audited financial statements for our most recent
fiscal year, which ended March 31, 2005.
2. IN SECTION 3.2 IN EACH OF THE SECURITIES PURCHASE AGREEMENTS DATED
DECEMBER 23, 2004 AND DECEMBER 4, 2003, REFERENCE IS MADE TO AN ESCROW
AGREEMENT. PLEASE PROVIDE US COPIES OF THE AGREEMENTS AND IN YOUR
RESPONSE LETTER EXPLAIN THE PURPOSE AND EFFECT OF SUCH AGREEMENTS. TELL
US WHY THESE ESCROW AGREEMENTS WERE NOT FILED AS EXHIBITS TO THE FORM
8-K FILED DECEMBER 30, 2004 OR YOUR FORM S-3 FILED JANUARY 26, 2004, AS
APPLICABLE. PROVIDE US WITH A COPY OF ANY OTHER AGREEMENTS BETWEEN
NETGURU, LAURUS MASTER FUND AND ANY THIRD PARTIES CONCERNING THE NOTES
AND WARRANTS SOLD ON DECEMBER 23, 2004 AND DECEMBER 4, 2003, THAT WERE
NOT FILED WITH THE FORM 8-K OR FORM S-3, RESPECTIVELY. TELL US THE
AMOUNT CONVEYED BY LAURUS MASTER FUND TO NETGURU IN PAYMENT FOR THE
NOTES AND WHEN AND HOW THOSE FUNDS WERE TRANSFERRED. DESCRIBE THE
FUNCTION OF THE ESCROW AGREEMENT, ESCROW AGENT OR OTHER PARTIES IN THIS
PROCESS.
We have enclosed copies of the escrow agreements that were referred to
in the securities purchase agreements dated December 23, 2004 and
December 4, 2003. Besides the escrow agreements, there are no other
agreements with Laurus concerning the December 2003 and December 2004
private placements that were not filed as exhibits. The purpose and
effect of the escrow agreements was to have a third-party act as escrow
agent to collect the funds from Laurus Master Fund and to collect all
necessary executed agreements from Laurus Master Fund and us prior to
the release of funds and the exchange of the executed agreements
pursuant to the securities purchase agreements. The escrow agent
disbursed the funds as instructed by a disbursement letter, which
included the disbursement of any fees in connection with the securities
purchase agreements.
We have also included for your review the disbursement letters dated
December 23, 2004 and December 4, 2003 executed by both Laurus Master
Fund and us for release of the funds from the escrow agent. These
escrow agreements were not filed as exhibits to the Form 8-K filed
December 30, 2004 or the Form S-3 filed January 26, 2004 as we did not
consider them to be material agreements and the escrow terminated upon
the closing of the two transactions.
On December 4, 2003, Laurus Master Fund conveyed $500,000 for payment
of the 2003 convertible note. Upon receipt of disbursement instructions
from both Laurus Master Fund and us, the escrow agent disbursed the
funds via wire transfer as follows: 1.) $484,500 to us; 2.) $10,000 to
Laurus Capital Management, L.L.C. as closing fees; 3.) $5,000 to Laurus
Capital Management, L.L.C. as reimbursement of legal fees and due
diligence expenses; and 4.) $500 to Dechert LLP as an escrow agent fee.
<PAGE>
Mark P. Shuman
July 21, 2005
Page 3
On December 23, 2004, Laurus Master Fund conveyed $1,000,000 for
payment of the 2004 convertible note. Upon receipt of disbursement
instructions from both Laurus and us, the escrow agent disbursed the
funds via wire transfer as follows: 1.) $989,500 to us; 2.) $5,000 to
Laurus Capital Management, L.L.C. for management fees; 3.) $5,000 to
Laurus Capital Management, L.L.C. for reimbursement of due diligence
and documentation fees; and 4.) $500 to Loeb & Loeb, LLP as an escrow
agent fee.
Selling Security Holders
------------------------
Selling Security Holders Table, p. 16
-------------------------------------
3. PLEASE DISCLOSE THE NATURAL PERSONS WHO EXERCISE THE VOTING AND/OR
DISPOSITIVE POWERS WITH RESPECT TO THE SECURITIES TO BE OFFERED FOR
RESALE BY YOUR SELLING SECURITYHOLDERS THAT DO NOT FILE PERIODIC
REPORTS UNDER THE EXCHANGE ACT. WE NOTE THAT CERTAIN SELLING
SECURITYHOLDERS, SUCH AS GRAL, DO NOT DISCLOSE THE INDIVIDUALS WHO
EXERCISE THESE POWERS. PLEASE SEE INTERPRETATION I.60 OF OUR JULY 1997
MANUAL OF PUBLICLY AVAILABLE TELEPHONE INTERPRETATIONS AND
INTERPRETATION 4S OF THE REGULATION S-K PORTION OF THE MARCH 1999
SUPPLEMENT TO OUR JULY 1997 MANUAL OF PUBLICLY AVAILABLE TELEPHONE
INTERPRETATIONS.
The footnotes to the selling security holder table at pages 17 and 18
of the Form S-3/A have been updated and revised to disclose the natural
persons who exercise voting and/or dispositive power over shares held
by each selling security holder.
4. PLEASE DISCLOSE WHETHER ANY SELLING SECURITYHOLDER IS A REGISTERED
BROKER-DEALER. IF A SELLING SECURITYHOLDER IS A REGISTERED
BROKER-DEALER, PLEASE IDENTIFY SUCH REGISTERED BROKER-DEALER AS AN
UNDERWRITER IN YOUR DISCLOSURE, UNLESS THE SHARES WERE ACQUIRED AS
TRANSACTION-BASED COMPENSATION FOR INVESTMENT-BANKING SERVICES. PROVIDE
A DESCRIPTION OF THE INVESTMENT-BANKING SERVICES AND THE MANNER IN
WHICH THE COMPENSATION FOR THE SERVICES WAS COMPUTED, AS APPLICABLE. WE
NOTE THAT YOU HAVE IDENTIFIED THE SEIDLER COMPANIES AND FIRST MONTAUK
SECURITIES AS REGISTERED BROKER-DEALERS.
The descriptions under the heading "Other Selling Security Holders" at
pages 26 and 27 of the Form S-3/A have been revised to provide the
requested information. As we discussed with Mr. Daniel Lee, each of the
registered broker-dealers acquired the securities it is offering as
compensation for services based on their investment banking expertise,
and therefore, none has been named an underwriter.
<PAGE>
Mark P. Shuman
July 21, 2005
Page 4
5. PLEASE DISCLOSE WHETHER ANY SELLING SECURITYHOLDER IS AN AFFILIATE OF A
REGISTERED BROKER-DEALER. IF A SELLING SECURITYHOLDER IS AN AFFILIATE
OF A REGISTERED BROKER-DEALER, PLEASE EXPAND THE PROSPECTUS DISCLOSURE
TO INDICATE WHETHER SUCH SELLING SECURITYHOLDER ACQUIRED THE SECURITIES
TO BE RESOLD IN THE ORDINARY COURSE OF BUSINESS. ALSO INDICATE WHETHER
AT THE TIME OF THE ACQUISITION SUCH SELLING SECURITYHOLDER HAD ANY
AGREEMENTS, UNDERSTANDINGS OR ARRANGEMENTS WITH ANY OTHER PERSONS,
EITHER DIRECTLY OR INDIRECTLY, TO DISPOSE OF THE SECURITIES.
The descriptions under the heading "Other Selling Security Holders" at
pages 26 and 27 of the Form S-3/A have been revised to provide the
requested information.
Private Placements Through which the Selling Security Holders...
----------------------------------------------------------------
Laurus Master Fund. Ltd. Strategic Financings. p. 19
----------------------------------------------------
6. PLEASE ADVISE US OF THE REASON FOR AMENDING AND RESTATING YOUR DECEMBER
2003 NOTE. TELL US THE NATURE OF THE CHANGES THAT AFFECTED THE
ECONOMICS OF THE CREDITOR-DEBTOR RELATIONSHIP, IN ADDITION TO THE
INCREASE IN THE MONTHLY PAYMENT AMOUNTS. FOR EXAMPLE, IF THE CONVERSION
RIGHTS OF THE NOTEHOLDER WERE MODIFIED, PLEASE DESCRIBE THE CHANGE. IN
YOUR RESPONSE LETTER, PLEASE DESCRIBE ALL SIGNIFICANT CHANGES TO THE
NOTE WHEN IT WAS AMENDED AND RESTATED ON APRIL 27, 2004. PLEASE ADVISE
WHETHER AND, IF SO, WHEN SHARES WERE ISSUED AND RESOLD PURSUANT TO THE
PRIOR REGISTRATION STATEMENT.
The Company amended and restated the December 2003 convertible note to
reflect an additional $1,000,000 that the Company borrowed on April 27,
2004, which the Company used for working capital. The amount of monthly
principal payment was increased from $30,000 to $50,000 and the
terminal payment changed from $440,000 to $710,000. Also, the initial
repayment date was changed from April 1, 2004 to August 1, 2004. These
are the most significant changes and are described at page 23 of the
Form S-3/A.
A total of 368,462 shares were issued and resold pursuant to the prior
registration statement: 200,000 shares were issued on April 5, 2004 and
sold between April 19, 2004 and April 28, 2004; 80,000 shares were
issued and sold on December 8, 2004 and 88,462 shares were issued and
sold on December 27, 2004.
Other Selling Security Holders. p. 26
-------------------------------------
7. WE NOTE YOUR DISCLOSURE REGARDING THE ISSUANCE OF WARRANTS TO J.P.
TURNER AND COMPANY, THE SEIDLER COMPANIES AND SILVERMAN HELLER
ASSOCIATES AS PARTIAL CONSIDERATION FOR STRATEGIC INVESTOR RELATIONS'
SERVICES. PLEASE ELABORATE TO DISCUSS HOW SUCH WARRANTS ONLY
REPRESENTED PARTIAL CONSIDERATION FOR SUCH SERVICES.
<PAGE>
Mark P. Shuman
July 21, 2005
Page 5
The descriptions under the heading "Other Selling Security Holders" at
pages 26 and 27 of the Form S-3/A have been revised to provide the
requested information.
8. PLEASE PROVIDE ADDITIONAL CONTEXT IN YOUR DISCLOSURE FOR THE
TRANSACTIONS IN WHICH YOUR SELLING SECURITYHOLDERS OBTAINED THEIR
SECURITIES. FOR EXAMPLE, PLEASE ELABORATE ON THE SETTLEMENT AGREEMENT
WITH GRAL AND THE FINANCING AGREEMENT WITH MR. KELLOGG AS WELL AS
PROVIDE ADDITIONAL DETAIL ON THE SERVICES MR. NIWAYAMA AND CERTAIN OF
YOUR OPTIONEES PROVIDED TO YOU.
The descriptions under the heading "Other Selling Security Holders" at
pages 26 and 27 of the Form S-3/A have been revised to provide the
requested information.
Plan of Distribution
--------------------
9. WE NOTE YOUR REFERENCE TO AGREEMENTS BY CERTAIN SELLING SECURITYHOLDERS
IN WHICH THEY HAVE AGREED TO CERTAIN RESTRICTIONS ON THEIR RESALE OF
SHARES OF YOUR COMMON STOCK. PLEASE FILE SUCH AGREEMENTS AS EXHIBITS TO
YOUR REGISTRATION STATEMENT.
The restriction on sale of shares of our common stock by J.P. Turner &
Company, LLC is contained in paragraph no. 8 of the common stock
purchase warrant that is listed as Exhibit 4.14 to the Form S-3/A and
is incorporated by reference from exhibit 4.6 to the registration
statement on Form S-3 (file no. 333-112181) that was filed with the SEC
on January 26, 2004.
The restriction on sale of shares of our common stock by The Seidler
Companies, Incorporated is contained in paragraph no. 8 of the common
stock purchase warrant that is listed as Exhibit 4.15 to the Form S-3/A
and is incorporated by reference from exhibit 4.7 to the registration
statement on Form S-3 (file no. 333-112181) that was filed with the SEC
on January 26, 2004.
The restriction on sale of shares of our common stock by Silverman
Heller Associates is contained in paragraph no. 8 of the common stock
purchase warrant that is listed as Exhibit 4.16 to the Form S-3/A and
is incorporated by reference from exhibit 4.8 to the registration
statement on Form S-3 (file no. 333-112181) that was filed with the SEC
on January 26, 2004.
The restriction on sale of shares of our common stock by Mr. Niwayama
is contained in paragraph no. 2 of the stock compensation agreement
that is listed as Exhibit 4.20 to the Form S-3/A and is incorporated by
reference from exhibit 4.3 to the registration statement on Form S-3
(file no. 333-100651) that was filed with the SEC on October 21, 2002.
<PAGE>
Mark P. Shuman
July 21, 2005
Page 6
Item 16. Exhibits
-----------------
10. PURSUANT TO ITEM 601(B) OF REGULATION S-K, PLEASE ENSURE THAT YOU HAVE
FILED ALL NECESSARY EXHIBITS IN THIS REGISTRATION STATEMENT INCLUDING
OPINIONS AND MATERIAL AGREEMENTS, SUCH AS OUTSTANDING WARRANTS AND
AGREEMENTS REMAINING TO BE PERFORMED AT OR AFTER THE FILING OF YOUR
REGISTRATION STATEMENT, E.G., AGREEMENTS WITH CONTINUING REGISTRATION
RIGHTS. PLEASE NOTE THAT RULE 429(B) UNDER THE SECURITIES ACT STATES
THAT THIS REGISTRATION STATEMENT SHALL ACT AS A POST EFFECTIVE
AMENDMENT TO THE PRIOR REGISTRATION STATEMENTS WHOSE PROSPECTUSES HAVE
BEEN COMBINED IN THIS REGISTRATION STATEMENT. AS A RESULT, ALL
NECESSARY EXHIBITS RELATING TO SHARES REGISTERED IN PRIOR REGISTRATION
STATEMENTS SHOULD BE REFERENCED IN THE EXHIBIT INDEX AND INCORPORATED
BY REFERENCE FROM THE PRIOR FILING, OR SHOULD BE FILED WITH THIS
REGISTRATION STATEMENT.
The exhibit index contained at pages II-2 to II-4 of the Form S-3/A has
been revised to list all necessary exhibits relating to shares
registered in the current and prior registration statements. Pursuant
to the request of Mr. Daniel Lee, the new legal opinion attached as
Exhibit 5.1 covers the 3,845,078 shares being newly registered on this
Form S-3 and the 2,127,787 shares being carried forward from
Registration Statement No. 333-112181 with regard to the December 2003
convertible note.
We trust the foregoing is responsive to your comments. If I may be of
further assistance, please call me at (714) 974-2500.
Sincerely yours,
NETGURU, INC.
/s/ Bruce Nelson
----------------------------