SEC Company Response from SIGNATURE LEISURE INC (CIK 0001135194) — Dec 6, 2005
SIGNATURE LEISURE INC (CIK 0001135194)
Date: Dec. 6, 2005 · CIK: 0001135194 · Accession: 0001144204-05-038936
AI Filing Summary & Sentiment
File numbers found in text: 333-126509
Referenced dates: August 8, 2005
Letter
Mr. Larry Spirgel Assistant Director United States Securities and Exchange Commission 450 Fifth Street, N. W., Mail Stop 0407 Washington, D.C. 20549 Form 10-KSB for the fiscal year ended Dec. 31, 2004 Filed April 18, 2005 Form 10-QSB for the quarter ended March 31, 2005 Filed May 23, 2005 File No. 0-49600
Re: Signature Leisure, Inc. Registration Statement on Form SB-2 Filed on July 13, 2005, as amended File No. 333-126509
Dear Mr. Carnes:
At the request of the Securities and Exchange Commission we are providing this letter in response to certain comments made in the Commission's letter dated August 8, 2005 regarding our Registration Statement filed on July 13, 2005, as amended, our Form 10-KSB filed April 18, 2005 and Form 10-QSB -2 filed on May 23, 2005. We hereby provided the following responses.
Prospectus Summary, Page 1
COMMENT 1: Please revise to discuss very briefly, but in more definite and concrete terms the key aspects of your business. Your current disclosure is too vague. In this regard, please address the following:
o Clearly disclose how you generate revenue and the extent to which you are currently generating revenues from your products and services. For example, clarify what you mean by "reestablishing" your auto dealer operations. Do you have an operational dealership with inventory? To the extent that these products and services are not generating revenue, briefly disclose the steps you must take to make them operational. <PAGE>
Mr. Larry Spirgel December 6, 2005 Page 2
o We note a press release dated July 6, 2005, prior to your filing of this registration statement, that you "entered into the information technology services industry and has begun servicing clients in Central Florida." Briefly describe this business and provide sufficient information so that investors can assess how material it is to your business. File this agreement as an exhibit.
o Disclose your revenues and net losses for the quarter ended March 31, 2005 and for the year ended December 31, 2004. Please also disclose your accumulated deficit and total assets.
o We note your discussion of your auditor's "going concern" opinion: Please revise to quantify very briefly how much funding you will need to raise to operate in the next twelve months.
RESPONSE: We have revised our disclosure to disclose how we generate revenues and clarify our disclosure regarding our auto-dealer operations and our entry into the technology-services industry. We have also revised our disclosure to include our revenues, net losses and how much funding we will need to raise to operate in the next twelve months.
The Offering, page 2
COMMENT 2: Explain how you calculate the "lowest volume weighted average price." Further, revise to clarify, if true, that the 1 % fee is a cash fee or discount that is retained by Katalyst Capital and that it does not represent additional shares issued to Katalyst Capital.
RESPONSE: The lowest volume-weighted average price is obtained from Bloomberg, LP, a stock information-gathering service. Katalyst Capital and Signature Leisure have agreed to use the services of Bloomberg, LP as an independent third-party source of information to determine the lowest volume-weighted average price.
<PAGE>
Mr. Larry Spirgel December 6, 2005 Page 3
COMMENT 3. We note your disclosure in footnote 2 regarding the convertible debentures and the compensation debenture. We also note your disclosure in the liquidity and capital resources section regarding the "second promissory note" issued to Katalyst Capital in Feb. 2005 and the promissory note issued to Katalyst Capital in December 2004. In your response letter, please identify all securities of Signature Leisure currently held by Katalyst Capital. File the relevant agreements relating to these securities (including the instruments defining the rights of the securities). Indicate in your response letter whether these securities are convertible or exercisable into other Signature Leisure securities and whether the conversion prices, exercise prices, or formulas are based on the market price of other Signature Leisure securities.
RESPONSE: We have not issued any convertible debentures to Katalyst Capital. We have corrected our disclosure accordingly. Katalyst Capital currently holds one million shares of our common stock that we issued to Katalyst Capital as a one-time commitment fee pursuant to the terms of the Standby Equity Distribution Agreement.
COMMENT 4: Please clarify that the sales of shares by Katalyst Capital will likely cause the market price of your common stock, to decline, which will require you to issue increasing numbers of shares to Katalyst Capital. Please similarly clarify your risk factors entitled "Management Recognizes That We Must Raise Additional Financing ..." on page 6 and your risk factor entitled "Future Sales by Our Stockholders ...", on page 9.
RESPONSE: We have revised our disclosure to clarify that the sale of our shares by Katalyst Capital will likely cause the market price of our common stock to decline and have similarly revised the risk factors as requested.
COMMENT 5: Tell us in your response letter how Spencer-Clarke, LLC facilitated the equity line agreement. Detail the role that Spencer-Clarke, LLC played in bringing the parties together. Confirm that there are no affiliations among Spencer-Clarke, LLC, Katalyst Capital Group, the company or any of its executives.
RESPONSE: Spencer-Clarke provided due diligence information and investment counsel to us. Spencer-Clarke also consulted with us regarding the structure of the financing and the nature of our relationship with the investor, Katalyst Capital. We confirm that there are no affiliations among Spencer-Clarke, Katalyst Capital, Signature Leisure or its executives.
<PAGE>
Mr. Larry Spirgel December 6, 2005 Page 4
COMMENT 6: Please disclose that under Section 7.2(h) of your equity line agreement that the number of shares issuable to Katalyst Capital may not cause Katalyst Capital to own more than 9.9% of your outstanding shares. Revise your table on page 2 to reflect this limitation. For example, revise the net cash to Signature column to make clear that these amounts could be considerably less if Katalyst Capital retains a portion of the stock that it purchases from the company.
RESPONSE: We have revised the table on page 2 by providing a footnote that makes clear that the net cash that is being provided to us under the Equity Distribution Agreement could be considerably less if Katalyst Capital retains a portion of the stock that it purchases from us.
COMMENT 7: We note footnote (1) on page 3. Please revise the footnote to indicate that up to 163,398,693 shares of your common stock may be issued (as opposed to will be issued) due the uncertainty surrounding the success of the offering. Carefully review the rest of your prospectus and make conforming changes elsewhere.
RESPONSE: We have revised footnote (1) on page 3 as requested.
Risk Factors, page 6
COMMENT 8: Add a risk factor highlighting the terms of Mr. Carnes' employment agreement. Address the uncertainty on how the company's obligations will be funded given the company's precarious financial condition. In addition, we note that Mr. Carnes' Employment Agreement dated September 3, 2003 was executed on behalf of Signature Leisure by Mr. Carnes. Discuss any potential conflict of interest concerns relating to the execution of his employment agreement.
RESPONSE: We have added a risk factor highlighting the terms of Mr. Carnes' employment agreement. In addition, we have discussed the potential conflict of interest relating to the execution of Mr. Carnes' employment agreement.
<PAGE>
Mr. Larry Spirgel December 6, 2005 Page 5
COMMENT 9: Do not present risks that could apply to any issuer in your industry, do not reflect your current operations, are not material, or are generic, boilerplate disclosure. Rather, tailor each risk factor to your specific facts and circumstances. To the extent that a risk is not material to you or your investors, consider whether you need to include it. We note as illustrative examples the following:
o Future Acquisitions May Disrupt Our Business..., page 7
o We Are Subject to Price Volatility..., page 8
o We May Not be Able to Compete Effectively..., page 8
o We May Not be Able to Manage Growth ..., page 8
o The Price You Pay in This Offering Will Fluctuate..., page 10
RESPONSE: We have revised our disclosure as requested by deleting those risk factors that are not material or that could be considered generic, boiler-plate disclosure.
Signature Has Historically Lost Money..., page 6
COMMENT 10: Disclose how much funding you will need to raise in the next twelve months and disclose when you anticipate reaching profitability.
RESPONSE: We have revised our disclosure to provide the amount of funding we will need to raise in the next twelve months and how we intend to reach profitability.
Management Recognizes That we Must Raise Additional Financing. . ., page 6
COMMENT 11: Please disclose that if Signature Leisure uses funds from the equity distribution agreement for acquisitions, Mr. Carnes will be entitled to receive $150,000 for each acquisition. Disclose, if true, that these bonus amounts would be funded from the equity line.
RESPONSE: We have revised the risk factor as requested.
<PAGE>
Mr. Larry Spirgel December 6, 2005 Page 6
Our common Stock May be Affected...,, page 7
COMMENT 12: Please revise your heading to clarify how the low trading volume may affect your shareholders' ability to sell shares. Also, disclose in the text the average daily trading volume of your stock. Please combine your disclosure regarding price fluctuation with your risk factor regarding price volatility on page 8.
RESPONSE: We have revised our disclosure as requested.
We Could Fail to Attract or Retain Key Personnel ..., page. 7
COMMENT 13. Move the risk factor to the beginning of this section. Revise your caption to disclose that you have and depend on one officer, Mr. Carnes, and that Mr. Carnes is also the CFO of another publicly traded company and, therefore, does not devote all of his time to Signature Leisure. In the text, highlight the risks associated with your officer trying to develop the company's various fledgling businesses and manage the reporting requirements of a public company while only working part-time. Also, disclose, if true, Mr. Carnes' lack of direct prior experience in operating the various businesses you intend to develop.
RESPONSE: We have revised our disclosure as requested.
Existing Shareholders Will Experience Significant Dilution..., page 9
COMMENT 14. Delete the reference to "our net income per share could decrease in future periods" since the company has never had net income.
RESPONSE: We have revised our disclosure as requested.
The Selling Stockholders Intend to Sell Their Shares ..., page 9
COMMENT 15. We note that, under the terms of your equity distribution agreement, Katalyst Capital is permitted to sell shares corresponding to a particular advance before those shares have been delivered. Please disclose that Katalyst Capital can engage in short sales and cover the position with shares issued under your equity line of credit. In addition, please discuss what affect this will have on the market price of your common stock.
RESPONSE: Pursuant to the terms of the Equity Distribution Agreement, Katalyst Capital is prohibited from engaging in short sales and has represented to Signature Leisure that neither Katalyst Capital nor any of its affiliates will engage in short sales of our common stock.
<PAGE>
Mr. Larry Spirgel December 6, 2005 Page 7
Our Common Stock May be Affected ..., page10
COMMENT 16. This risk factor merely repeats your risk factor regarding your limited trading volume on page 7. Please delete.
RESPONSE: We have revised our disclosure by deleting the risk factor as requested.
Our Common Stock is Deemed to be "Penny Stock"..., page 10
COMMENT 17. The risk you convey is unclear. It appears that the risk is that the penny stock rules may result in fewer brokers willing to make a market in your shares. Please revise.
RESPONSE: We have revised the risk factor as requested.
We May Not be Able to Obtain..., page
COMMENT 18. Please disclose that even though Katalyst Capital may not hold more than 9.9% of your common stock at any one time, this restriction does not prevent Katalyst Capital from selling some of its holdings and then receiving additional shares.
RESPONSE: We have revised the risk factor disclosure as requested.
Selling, Stockholders..., page 13
COMMENT 19. Disclose the "Consultants and Others" and the shares that are being registered on their behalf Disclose how those shares were acquired.
RESPONSE: We have revised the selling stockholders' table to delete any references to other selling stockholders and consultants as the only selling stockholder is Katalyst Capital.
<PAGE>
Mr. Larry Spirgel December 6, 2005 Page 8
Use of Proceeds, page 15
COMMENT 20. Disclose any proceeds that Mr. Carnes will be receiving from the equity line from his accrued salary and bonuses.
RESPONSE: We have revised our disclosure to reflect that proceeds received from the Equity Distribution Agreement may be used to pay any accrued salaries we currently owe Mr. Carnes for his services as our Chief Executive Officer. We have also disclosed that Signature Leisure has not made any determination regarding the a
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December 6, 2005
VIA TELEFAX AND REGULAR MAIL
Mr. Larry Spirgel
Assistant Director
United States Securities and Exchange Commission
450 Fifth Street, N. W., Mail Stop 0407
Washington, D.C. 20549
Re: Signature Leisure, Inc.
Registration Statement on Form SB-2
Filed on July 13, 2005, as amended
File No. 333-126509
Form 10-KSB for the fiscal year ended Dec. 31, 2004
Filed April 18, 2005
Form 10-QSB for the quarter ended March 31, 2005
Filed May 23, 2005
File No. 0-49600
Dear Mr. Carnes:
At the request of the Securities and Exchange Commission we are providing
this letter in response to certain comments made in the Commission's letter
dated August 8, 2005 regarding our Registration Statement filed on July 13,
2005, as amended, our Form 10-KSB filed April 18, 2005 and Form 10-QSB -2 filed
on May 23, 2005. We hereby provided the following responses.
Prospectus Summary, Page 1
COMMENT 1: Please revise to discuss very briefly, but in more definite and
concrete terms the key aspects of your business. Your current
disclosure is too vague. In this regard, please address the
following:
o Clearly disclose how you generate revenue and the extent to
which you are currently generating revenues from your products
and services. For example, clarify what you mean by
"reestablishing" your auto dealer operations. Do you have an
operational dealership with inventory? To the extent that
these products and services are not generating revenue,
briefly disclose the steps you must take to make them
operational.
<PAGE>
Mr. Larry Spirgel
December 6, 2005
Page 2
o We note a press release dated July 6, 2005, prior to your
filing of this registration statement, that you "entered into
the information technology services industry and has begun
servicing clients in Central Florida." Briefly describe this
business and provide sufficient information so that investors
can assess how material it is to your business. File this
agreement as an exhibit.
o Disclose your revenues and net losses for the quarter ended
March 31, 2005 and for the year ended December 31, 2004.
Please also disclose your accumulated deficit and total
assets.
o We note your discussion of your auditor's "going concern"
opinion: Please revise to quantify very briefly how much
funding you will need to raise to operate in the next twelve
months.
RESPONSE: We have revised our disclosure to disclose how we generate revenues
and clarify our disclosure regarding our auto-dealer operations and
our entry into the technology-services industry. We have also
revised our disclosure to include our revenues, net losses and how
much funding we will need to raise to operate in the next twelve
months.
The Offering, page 2
COMMENT 2: Explain how you calculate the "lowest volume weighted average
price." Further, revise to clarify, if true, that the 1 % fee is a
cash fee or discount that is retained by Katalyst Capital and that
it does not represent additional shares issued to Katalyst Capital.
RESPONSE: The lowest volume-weighted average price is obtained from Bloomberg,
LP, a stock information-gathering service. Katalyst Capital and
Signature Leisure have agreed to use the services of Bloomberg, LP
as an independent third-party source of information to determine the
lowest volume-weighted average price.
2
<PAGE>
Mr. Larry Spirgel
December 6, 2005
Page 3
COMMENT 3. We note your disclosure in footnote 2 regarding the convertible
debentures and the compensation debenture. We also note your
disclosure in the liquidity and capital resources section regarding
the "second promissory note" issued to Katalyst Capital in Feb. 2005
and the promissory note issued to Katalyst Capital in December 2004.
In your response letter, please identify all securities of Signature
Leisure currently held by Katalyst Capital. File the relevant
agreements relating to these securities (including the instruments
defining the rights of the securities). Indicate in your response
letter whether these securities are convertible or exercisable into
other Signature Leisure securities and whether the conversion
prices, exercise prices, or formulas are based on the market price
of other Signature Leisure securities.
RESPONSE: We have not issued any convertible debentures to Katalyst Capital.
We have corrected our disclosure accordingly. Katalyst Capital
currently holds one million shares of our common stock that we
issued to Katalyst Capital as a one-time commitment fee pursuant to
the terms of the Standby Equity Distribution Agreement.
COMMENT 4: Please clarify that the sales of shares by Katalyst Capital will
likely cause the market price of your common stock, to decline,
which will require you to issue increasing numbers of shares to
Katalyst Capital. Please similarly clarify your risk factors
entitled "Management Recognizes That We Must Raise Additional
Financing ..." on page 6 and your risk factor entitled "Future Sales
by Our Stockholders ...", on page 9.
RESPONSE: We have revised our disclosure to clarify that the sale of our
shares by Katalyst Capital will likely cause the market price of our
common stock to decline and have similarly revised the risk factors
as requested.
COMMENT 5: Tell us in your response letter how Spencer-Clarke, LLC facilitated
the equity line agreement. Detail the role that Spencer-Clarke, LLC
played in bringing the parties together. Confirm that there are no
affiliations among Spencer-Clarke, LLC, Katalyst Capital Group, the
company or any of its executives.
RESPONSE: Spencer-Clarke provided due diligence information and investment
counsel to us. Spencer-Clarke also consulted with us regarding the
structure of the financing and the nature of our relationship with
the investor, Katalyst Capital. We confirm that there are no
affiliations among Spencer-Clarke, Katalyst Capital, Signature
Leisure or its executives.
3
<PAGE>
Mr. Larry Spirgel
December 6, 2005
Page 4
COMMENT 6: Please disclose that under Section 7.2(h) of your equity line
agreement that the number of shares issuable to Katalyst Capital may
not cause Katalyst Capital to own more than 9.9% of your outstanding
shares. Revise your table on page 2 to reflect this limitation. For
example, revise the net cash to Signature column to make clear that
these amounts could be considerably less if Katalyst Capital retains
a portion of the stock that it purchases from the company.
RESPONSE: We have revised the table on page 2 by providing a footnote that
makes clear that the net cash that is being provided to us under the
Equity Distribution Agreement could be considerably less if Katalyst
Capital retains a portion of the stock that it purchases from us.
COMMENT 7: We note footnote (1) on page 3. Please revise the footnote to
indicate that up to 163,398,693 shares of your common stock may be
issued (as opposed to will be issued) due the uncertainty
surrounding the success of the offering. Carefully review the rest
of your prospectus and make conforming changes elsewhere.
RESPONSE: We have revised footnote (1) on page 3 as requested.
Risk Factors, page 6
COMMENT 8: Add a risk factor highlighting the terms of Mr. Carnes' employment
agreement. Address the uncertainty on how the company's obligations
will be funded given the company's precarious financial condition.
In addition, we note that Mr. Carnes' Employment Agreement dated
September 3, 2003 was executed on behalf of Signature Leisure by Mr.
Carnes. Discuss any potential conflict of interest concerns relating
to the execution of his employment agreement.
RESPONSE: We have added a risk factor highlighting the terms of Mr. Carnes'
employment agreement. In addition, we have discussed the potential
conflict of interest relating to the execution of Mr. Carnes'
employment agreement.
4
<PAGE>
Mr. Larry Spirgel
December 6, 2005
Page 5
COMMENT 9: Do not present risks that could apply to any issuer in your
industry, do not reflect your current operations, are not material,
or are generic, boilerplate disclosure. Rather, tailor each risk
factor to your specific facts and circumstances. To the extent that
a risk is not material to you or your investors, consider whether
you need to include it. We note as illustrative examples the
following:
o Future Acquisitions May Disrupt Our Business..., page 7
o We Are Subject to Price Volatility..., page 8
o We May Not be Able to Compete Effectively..., page 8
o We May Not be Able to Manage Growth ..., page 8
o The Price You Pay in This Offering Will Fluctuate..., page 10
RESPONSE: We have revised our disclosure as requested by deleting those risk
factors that are not material or that could be considered generic,
boiler-plate disclosure.
Signature Has Historically Lost Money..., page 6
COMMENT 10: Disclose how much funding you will need to raise in the next twelve
months and disclose when you anticipate reaching profitability.
RESPONSE: We have revised our disclosure to provide the amount of funding we
will need to raise in the next twelve months and how we intend to
reach profitability.
Management Recognizes That we Must Raise Additional Financing. . ., page 6
COMMENT 11: Please disclose that if Signature Leisure uses funds from the equity
distribution agreement for acquisitions, Mr. Carnes will be entitled
to receive $150,000 for each acquisition. Disclose, if true, that
these bonus amounts would be funded from the equity line.
RESPONSE: We have revised the risk factor as requested.
5
<PAGE>
Mr. Larry Spirgel
December 6, 2005
Page 6
Our common Stock May be Affected...,, page 7
COMMENT 12: Please revise your heading to clarify how the low trading volume may
affect your shareholders' ability to sell shares. Also, disclose in
the text the average daily trading volume of your stock. Please
combine your disclosure regarding price fluctuation with your risk
factor regarding price volatility on page 8.
RESPONSE: We have revised our disclosure as requested.
We Could Fail to Attract or Retain Key Personnel ..., page. 7
COMMENT 13. Move the risk factor to the beginning of this section. Revise your
caption to disclose that you have and depend on one officer, Mr.
Carnes, and that Mr. Carnes is also the CFO of another publicly
traded company and, therefore, does not devote all of his time to
Signature Leisure. In the text, highlight the risks associated with
your officer trying to develop the company's various fledgling
businesses and manage the reporting requirements of a public company
while only working part-time. Also, disclose, if true, Mr. Carnes'
lack of direct prior experience in operating the various businesses
you intend to develop.
RESPONSE: We have revised our disclosure as requested.
Existing Shareholders Will Experience Significant Dilution..., page 9
COMMENT 14. Delete the reference to "our net income per share could decrease in
future periods" since the company has never had net income.
RESPONSE: We have revised our disclosure as requested.
The Selling Stockholders Intend to Sell Their Shares ..., page 9
COMMENT 15. We note that, under the terms of your equity distribution agreement,
Katalyst Capital is permitted to sell shares corresponding to a
particular advance before those shares have been delivered. Please
disclose that Katalyst Capital can engage in short sales and cover
the position with shares issued under your equity line of credit. In
addition, please discuss what affect this will have on the market
price of your common stock.
RESPONSE: Pursuant to the terms of the Equity Distribution Agreement, Katalyst
Capital is prohibited from engaging in short sales and has
represented to Signature Leisure that neither Katalyst Capital nor
any of its affiliates will engage in short sales of our common
stock.
6
<PAGE>
Mr. Larry Spirgel
December 6, 2005
Page 7
Our Common Stock May be Affected ..., page10
COMMENT 16. This risk factor merely repeats your risk factor regarding your
limited trading volume on page 7. Please delete.
RESPONSE: We have revised our disclosure by deleting the risk factor as
requested.
Our Common Stock is Deemed to be "Penny Stock"..., page 10
COMMENT 17. The risk you convey is unclear. It appears that the risk is that the
penny stock rules may result in fewer brokers willing to make a
market in your shares. Please revise.
RESPONSE: We have revised the risk factor as requested.
We May Not be Able to Obtain..., page
COMMENT 18. Please disclose that even though Katalyst Capital may not hold more
than 9.9% of your common stock at any one time, this restriction
does not prevent Katalyst Capital from selling some of its holdings
and then receiving additional shares.
RESPONSE: We have revised the risk factor disclosure as requested.
Selling, Stockholders..., page 13
COMMENT 19. Disclose the "Consultants and Others" and the shares that are being
registered on their behalf Disclose how those shares were acquired.
RESPONSE: We have revised the selling stockholders' table to delete any
references to other selling stockholders and consultants as the only
selling stockholder is Katalyst Capital.
7
<PAGE>
Mr. Larry Spirgel
December 6, 2005
Page 8
Use of Proceeds, page 15
COMMENT 20. Disclose any proceeds that Mr. Carnes will be receiving from the
equity line from his accrued salary and bonuses.
RESPONSE: We have revised our disclosure to reflect that proceeds received
from the Equity Distribution Agreement may be used to pay any
accrued salaries we currently owe Mr. Carnes for his services as our
Chief Executive Officer. We have also disclosed that Signature
Leisure has not made any determination regarding the a