SEC Company Response from Thomas Equipment, Inc. (CIK 0001122380) — Oct 4, 2005
Thomas Equipment, Inc. (CIK 0001122380)
Date: Oct. 4, 2005 · CIK: 0001122380 · Accession: 0001144204-05-030767
AI Filing Summary & Sentiment
File numbers found in text: 333-124217
Referenced dates: August 4, 2005, August 26, 2005, May 20, 2005
Letter
Re: Thomas Equipment, Inc. Registration Statement on Form S-1 Amendment No. 4 File No. 333-124217
SICHENZIA ROSS FRIEDMAN FERENCE LLP 1065 Avenue of the Americas New York, NY 10018 Telephone: (212) 930-9700 Facsimile: (212) 930-9725
October 3, 2005
Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549
Attn: Peggy Fisher, Esq. Jay Mumford, Esq. Ms. Tara Harkins Ms. Michele Gohlke
Ladies and Gentlemen:
We are counsel to Thomas Equipment, Inc., a Delaware corporation (the "Company"), which has today filed Amendment No. 4 to its Registration Statement on Form S-1, Registration No. 333-124217 (as amended, the "Registration Statement"). This letter responds to your letter dated August 26, 2005, relating to comments of the Staff in connection with the above-referenced submission.
The responses to the Staff's comments are numbered to relate to the corresponding comments in your letter. Where applicable, the revised pages or sections of the Registration Statement have been referenced. Unless otherwise indicated, all page references contained herein are to the pages of the Registration Statement. Please note that, as we no longer qualify as a small business issuer, this amendment to the Registration Statement has been re-filed on Form S-1. For your convenience, four copies of the Registration Statement, marked against the previous filing on Form SB-2, have been forwarded to the Staff.
We appreciate your timely consideration of these matters in your review of the filing referenced above. If you or others have any questions or would like additional information, please contact me at 212-930-9700.
Very truly yours,
/s/ THOMAS A. ROSE
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Thomas A. Rose
cc: David Marks,
Chairman
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SICHENZIA ROSS FRIEDMAN FERENCE LLP
1065 Avenue of the Americas
New York, NY 10018
Telephone: (212) 930-9700
Facsimile: (212) 930-9725
October 3, 2005
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Attn: Peggy Fisher, Esq.
Jay Mumford, Esq.
Ms. Tara Harkins
Ms. Michele Gohlke
Re: Thomas Equipment, Inc.
Registration Statement on Form S-1
Amendment No. 4
File No. 333-124217
Ladies and Gentlemen:
We are counsel to Thomas Equipment, Inc., a Delaware corporation (the
"Company"), which has today filed Amendment No. 4 to its Registration Statement
on Form S-1, Registration No. 333-124217 (as amended, the "Registration
Statement"). This letter responds to your letter dated August 26, 2005, relating
to comments of the Staff in connection with the above-referenced submission.
The responses to the Staff's comments are numbered to relate to the
corresponding comments in your letter. Where applicable, the revised pages or
sections of the Registration Statement have been referenced. Unless otherwise
indicated, all page references contained herein are to the pages of the
Registration Statement. Please note that, as we no longer qualify as a small
business issuer, this amendment to the Registration Statement has been re-filed
on Form S-1. For your convenience, four copies of the Registration Statement,
marked against the previous filing on Form SB-2, have been forwarded to the
Staff.
We appreciate your timely consideration of these matters in your review of
the filing referenced above. If you or others have any questions or would like
additional information, please contact me at 212-930-9700.
Very truly yours,
/s/ THOMAS A. ROSE
----------------------------------------
Thomas A. Rose
cc: David Marks,
Chairman
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Thomas Equipment, Inc.
Amendment # 4 to Registration Statement on Form S-1
File No. 333-124217
Responses to SEC Comment Letter dated August 26, 2005
General
1. We note your response to our prior comment 4 from our letter dated August
4, 2005. Please confirm that you are not registering any shares under the
revolving note of $20,000,000, rather you are registering shares under a
convertible minimum borrowing note in principal amount of $8,000,000.
Response
The convertible minimum borrowing note in the principal amount of
$8,000,000 is a part of the $20,000,000 revolving note facility i.e., the
first $8,000,000 drawn down under the $20,000,000 revolving note facility
was automatically transferred to the minimum borrowing note. The shares
potentially issuable on conversion of the $8,000,000 convertible minimum
borrowing note are being registered. We are not currently registering any
shares that may be issued on conversion of any portion of the remaining
$12,000,000 of the revolving note facility.
Summary
2. Please add a recent events discussion in the summary about the impact of
your default on August 20, 2005 and any negotiations with your lenders.
Response
A "Recent Events" section has been added to the "Summary of Recent
Transactions", that discusses the current status of the Laurus loans, as
well as the status of the registration statement filing required in
connection with our convertible series A preferred stock.
Risk Factors, page 10
If we are required for any reason to Repay our Outstanding Secured Convertible
Notes..., page 14
3. Please update this risk factor to discuss the risks associated with your
default on August 20, 2005.
Response
The risk factor has been updated to include the current status of the
Laurus loans. In addition, two risk factors have been added related to the
series A preferred stock (firstly, on page 14, related to the status of
the required registration statement for the convertible preferred stock
and, secondly, on page 15, dealing with the potential dilution if there
are transactions at prices lower than the conversion price of the
preferred).
Selling Stockholders, page 63
4. As discussed with Jay Mumford by telephone, please explain in footnote 1
that 1,980,000 shares of common stock currently owned outright are being
sold by Laurus Capital Management, LLC in this offering.
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Response
Footnote 1 has been amended to include the 1,980,000 common shares
currently owned by Laurus.
Financial Statements of Thomas Equipment.Inc., page F-l
5. Please update the financial statements and pro forma information, as
necessary, as required by Item 310(g) of Regulation S-B.
Response
The financial statements have been updated to include our audited
financial statements for the nine months ended June 30, 2005 and those of
our predecessor for the three months ended September 30, 2004 and the two
years in the period ended June 30, 2004.
The pro forma information has been updated to include only a pro forma
income statement for the year ended June 30, 2005, as if the transactions
took place as of the beginning of that year.
6. Provide a currently dated consent from each of the independent public
accountants with your next amendment.
Response
Updated consents have been provided.
7. We note that you have entered into registration rights agreements, which
includes liquidated damages clauses that require the payment of liquidated
damages each month until the registration statement is declared effective
or effectiveness is maintained. Also, we note that any liquidation damages
are payable in cash. Tell us how you have accounted for the provisions of
the registration rights agreements under EITF 00-19 and EITF 05-04. Please
be detailed in your response.
Response
We are aware of and have considered the alternative views expressed in
EITF Issue No. 05-04, "The Effect of a Liquidated Damages Clause on a
Financial Instrument Subject to EITF Issue No. 00-19, 'Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock'"
We have not recognized the Registration Rights Agreement as a derivative
instrument, as we view any payments that may be required under the terms
of the Agreement as a contingent liability. Until the FASB or EITF reach a
consensus or provide other guidance on this topic, we believe that is an
accepted principle, even though, as you orally advised, the "Big Four"
accounting firms may have alternative views. We have included an extensive
discussion of this topic, and the status of the Laurus loans, under the
heading "Registration Rights Agreements and related accounting issues",
beginning on page 26. Please refer to that discussion for a more detailed
response on this topic.
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8. We note as a result of your noncompliance with the registration rights
agreement you are in default under the loan agreements with Laurus Capital
Management LLC beginning August 20, 2005. Please revise to address the
impact of the event of default in your liquidity and capital resources
section of MD&A and disclose this default in your financial statements.
Response
Information on the current status of the Laurus loans has been included in
the liquidity and capital resources section of MD&A, as well as in several
places in the registration statement:
1. In the "Recent Events" section on page 6 (Comment 2 above)
2. In the Risk Factors on page 14 (Comment 3 above)
3. In the section titled "Laurus Master Fund, Ltd.", beginning on page
24.
4. In the section titled "Registration Rights Agreements and related
accounting issues", beginning on page 26.
5. In the "Liquidity and Capital Resources" section, beginning on page
39.
6. In Note 2 "Liquidity and going concern" to the June 30, 2005
financial statements now included in the registration statement.
This Note is then referenced from Notes 12 and 13 to the financial
statements, which relate to the Laurus debt.
Financial Statements of Pneutech, Inc., page F-66
9. Please refer to prior comment 29. We note that you have updated your
audited financial statements to include the unaudited interim financial
statements as of and for the four months ended February 28, 2005 and for
the six months ended April 30, 2004. Please update the footnotes to
include the required interim disclosures as required by Item 310 (b) of
Regulation S-B.
Response
The footnotes have been updated to include relevant balance sheet and
income statement information as of February 28, 2005.
Pro Forma Combined Condensed Financial Statements, page F-88
Notes to Unaudited Pro Forma Combined Statement of Operations, page F-93
Note 3 Pro Forma Adjustments - Nine Months Ended March 31, 2005, page F-93
10. Please refer to prior comment 39. Reference is made to adjustment (c).
Revise your pro forma condensed statement of operations for the nine
months ended March 31, 2005 to include the amortization of the debt
discount recorded in connection with the issuance of the $1.9 million term
loan and $20 million credit facility.
Response
The pro forma combined statement of operations has been updated for the
year ended June 30, 2005 (and the pro forma for the prior year removed).
In updating the pro forma, adjustment (c) has been revised to include the
beneficial conversion feature for both the $1.9 million term loan and $20
million credit facility.
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11. Reference is made to adjustment (f). Please provide us with your
supporting calculation for this pro forma adjustment of $1,351,000.
Response
The supporting calculation for this adjustment, which was previously
provided to the SEC Staff on August 25, is summarized below.
Pro forma financing expense related to Pneutech Inc.:
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<CAPTION>
<S> <C>
Summary of Pneutech Inc. pro forma net financing expense:
Year ended October 31, 2004 $1,631
Less: November 1, 2003 to June 30, 2004 (1,150)
Add: November 1, 2004 to February 28, 2005 1,666
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2,147
Pro forma adjustment (f) (1,351)
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Pneutech - net financing expense included in pro forma $ 796
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Recalculation of the pro forma financing expense related to Pneutech
Inc.:
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<CAPTION>
Debt Interest Financing
Balance Rate Expense
-----------------------------------
<S> <C> <C> <C>
Average bank indebtedness $9,600 5.00% $480
Long term debt balance
Demand term loan $251 5.75% 14
Demand term loan 384 5.75% 22
Vehicle loan 9 7.90% 1
Samsung Industry loans 2,684 6.35% 170
Private loans 1,742 6.10% 106
Less: private loans repaid by issuance of Thomas
common stock on acquisition of Pneutech (494) 6.10% (30)
Other financial liabilities
Subordinated debenture 3,355 5.00% 168
JESSKATE 574 15.00% 86
Class A preferred shares 2,123 5.00% 106
Special preference shares 410 8.20% 34
Special shares 25 8.20% 2
Preference shares 82 8.20% 7
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Total annual interest expense 1,166
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Pro rata adjustment for 8 months (8/12 of $1,166) $777
Rounding 19
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Pneutech - net financing expense included in pro forma, as above $796
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Form 10-QSB for the Quarters Ended December 31, 2004 (As Amended) and March 31,
2005
12. Prior to the effectiveness of your Form S-B2, please revise your Form
10-QSB for the quarterly period ended December 31, 2004 and March 31, 2005
to incorporate the responses to our comments from the letters dated May
20, 2005, July 8, 2005, and August 4, 2005, as applicable.
Response
Revised Forms 10-QSB for the quarters ended March 31, 2005 and December
31, 2004 incorporating, where appropriate, responses to comments from your
letters of May 20, 2005, July 8, 2005, August 4, 2005 and August 26, 2005,
will be filed during the week of October 3, 2005.
Item 2. Controls and Procedures
13. We note your disclosure that management has concluded that your disclosure
controls and procedures were of "limited" effectiveness at the reasonable
assurance level. It does not appear that your certifying officers have
reached a conclusion that your disclosure controls and procedures are
effective. Please revise your filings to state, in clear and unqualified
language, the conclusions reached by your chief executive officer and your
chief financial officer on the effectiveness of y