SEC Comment Letter for INNOVATIVE CARD TECHNOLOGIES INC (CIK 0001300578) — Dec 30, 2004
INNOVATIVE CARD TECHNOLOGIES INC (CIK 0001300578)
Date: Dec. 30, 2004 · CIK: 0001300578 · Accession: 0000000000-04-042507
AI Filing Summary & Sentiment
File numbers found in text: 333-119814
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MAIL STOP 05-11
December 30, 2004
Mr. Alan Finkelstein
Chief Executive Officer
Innovative Card Technologies, Inc.
11601 Wilshire Boulevard, Suite 2160
Los Angeles, California 90025
Re: Innovative Card Technologies, Inc.
Registration Statement on Form SB-2
File No. 333-119814
Amendment No. 1 Filed December 9, 2004
Dear Mr. Finkelstein:
We have reviewed your amended filing and have the following
comments. Where indicated, we think you should revise your
document
in response to these comments. If you disagree, we will consider
your explanation as to why our comment is inapplicable or a
revision
is unnecessary. Please be as detailed as necessary in your
explanation. In some of our comments, we may ask you to provide
us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
General
1. We note that the registration statement continues to cover the
resale of over 75% of shares to be outstanding and approximately
60%
by officers, directors, major shareholders, promoters and
affiliates
of the company. We view resale transactions of this magnitude as
an
offering "by or on behalf of the issuer" for purposes of Rule
415(a)(4) of Regulation C. Under the rule, equity securities
offered
by or on behalf of the registrant cannot be sold "at the market"
price unless the offering satisfies the requirements set forth in
the
rule. Your offering does not appear to meet the requirements.
Please revise your registration statement to price the shares at
the
fixed price for the duration of the offering. The prospectus
should
also make clear the fact that certain persons are deemed
underwriters
in this offering. Revise your prospectus accordingly, including
your
cover page, summary and plan of distribution section.
Selling Stockholders, page 11
2. Please clarify the natural person who has voting and investment
control over the shares being offered by Bristol Capital Advisors.
In this regard, we do not understand reference to the Kessler
Revocable Trust in footnote 7 or to Mr. Kessler`s disclaimer of
beneficial ownership, especially given the revocable nature of the
trust. Please advise. See also footnote 4 on page 22.
3. We do not understand the repeated use of footnotes 6 and 12 for
several of the selling shareholders.
Security Ownership of Certain Beneficial Owners and Management,
page
20
4. Please be advised that each spouse is deemed the beneficial
owner
of the shares held by the other spouse. Refer to Securities Act
Release No. 33-4819 ("a person is regarded as the beneficial owner
of
securities held in the name of his or her spouse and their minor
children"). In this regard, please group together the shares
owned
by Dianna Derycz-Kessler and Paul Kessler for purposes of
calculating
beneficial ownership.
5. Based on the selling shareholder table, we note the following:
Karim Souki has beneficial ownership over the shares being offered
by
BSR Investment, LTD, Lanver Properties and Union Finance Int.,
which
represents total beneficial ownership of 12.9%; and David Mun-
Gavin
has beneficial ownership over the shares being offered by the
Elsmere
Group Ltd. and Freemont Trading Ltd., which represents total
beneficial ownership of 12% of the shares outstanding. Please
include Messrs. Souki and Mun-Gavin in the table of beneficial
ownership and indicate by footnote the various sources and amounts
of
their share ownership.
Description of Business, page 24
Manufacturing
6. We note that the power inlay technology will be built by a
domestic manufacturer. Please indicate whether you have
identified
such a manufacturer and if so the name is required in accordance
with
Item 101(b)(5) of Regulation S-B.
7. Please identify the supplier of the battery. We note you are
working with other battery manufacturers. Please elaborate
8. Please elaborate on the statement on page 27 that you have
"proven
the process of making the power inlays and incorporating them into
an
ISO compliant payment card."
Management Discussion and Analysis, page 28
Liquidity and Capital Resources
9. Reference is made to your various "lines of credit". For each
line, disclose the amount available as of the most recent
practicable
date.
10. With respect to our previous comment 63, we note your revision
to
the statement of cash flows. Also, in your supplementary response
to
prior comment 63, you state "the three $150,000 notes are not a
"line
of credit", rather they are notes payable." However, in MD&A you
discuss three $150,000 lines of credit. Please revise to
consistently refer to each agreement as a note payable or line of
credit, as appropriate. We also note your supplemental response
to
comment 57, discussing a "maximum borrowing limit." Revise the
discussion of the notes in MD&A and the footnotes as necessary to
fully describe the terms and conditions of the notes.
Certain Relationships and Related Transactions, page 32
11. In prior comment 50 we asked that you identify your promoters
and
provide the information required under Item 404(d) of Regulation
S-B.
We note your response and direct your attention to the definition
of
"promoter" in Rule 405 of Regulation C.
12. The advances and accounts payable to related parties indicated
on
the balance sheets and in Note 8 to the financial statements
should
be fully described hereunder, including names of the parties, high
amounts during each of the two years, amounts outstanding at the
latest practicable date, maturity dates and interest rates.
13. Terms of the $130,833 obligation to Forest Finkelstein should
be
similarly disclosed.
Executive Compensation, page 36
14. Please be aware that compensation paid for the current fiscal
year ending December 31st should be indicated, if known, and, in
any
case, must be disclosed in any prospectus after that date.
Financial Statements
Part II
Note 5 - Notes Payable
15. With respect to our previous comment 57, we note your revision
and supplemental response. Please continue your revisions by
clarifying that $350,000 and $100,000 was received in gross
proceeds
for the years ended 2002 and 2003, respectively.
16. With respect to our previous comment 58, we note your
revisions.
We reissue the part of our previous comment where we asked whether
the Company has any additional borrowing capacity under the
agreement
through April 30, 2005. If not, please revise the disclosure to
clarify this, as the disclosure currently states, "the balance of
the
note payable bears interest at 4%..." The present tense language
may
be confusing to a reader.
Note 6 - Patent and Trademark License Agreements
17. With respect to our previous comment 62, we note your
revisions.
You state that the "company receives sales reports within thirty
days
following the end of a calendar quarter from the customer". Due
to
the potential delay in receiving the report, please supplementally
tell us if the revenue reported in the report is recorded in the
quarter in which it was earned or in the quarter in which the
revenue
is reported to the Company.
Note 7 - Preferred Stock
18. With respect to our previous comment 63, we note your revision
to
note 7 however we did not see a revision to the same disclosure
included in note 1. We reiterate our request for you to revise
note
1 in accordance with our previous comment 63.
Note 8 - Related Party Transaction
Advances Payable - Related Parties
19. While we note your changes throughout the document with
respect
to our previous comment 67, we request that you continue your
revisions in the financial statements. Since the advances payable
do
not appear to be secured by a note, please amend the statement of
shareholders deficit and the supplemental schedule of non-cash
activities to refer to the advances payable as such and not as
notes
payable.
Consulting Agreements
20. We reissue our previous comment 65, as the notes to the
financial
statements were not amended to clarify the amount of consulting
fees
paid to Forest Finkelstein 2003 was $26,666.
Stock Options and Warrants
21. We note the stock option plan that was approved in August
2004.
Please update the plan description, in the notes to the financial
statements, to include vesting requirements and any other relevant
terms as per paragraph 46 of SFAS 123. Also, if any stock options
were issued during the nine month period ended September 30, 2004,
please update the disclosure so that it is compliant with
paragraphs
47 and 48 of SFAS 123. With respect to our previous comment 69,
we
reiterate our request for you to update the notes to the financial
statements so that the 2,400,000 warrants issued have the
appropriate
disclosures as per SFAS 123.
General
22. Please note the updating requirements of Item 310(g) of
Regulation S-B.
23. A currently dated consent of the independent public accountant
should be provided in all amendments to the registration
statement.
Exhibits
24. The confidential treatment request for portions of exhibit
10.18
has been received. We are in the process of reviewing the
request
and comments will be forthcoming separately.
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
Any questions regarding the accounting comments may be directed
to
Babette Cooper at (202) 824-5069 or to Ed Loftus at (202) 942-
2954.
Questions on other disclosure issues may be directed to William
Bennett at (202) 942-0135.
Sincerely,
John Reynolds, Assistant Director
Office of Emerging Growth Companies
cc: Nimish Patel, Esq.
Fax: (310) 208-1154
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Innovative Card Technologies, Inc.
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