SEC Comment Letter for Fluent, Inc. (FLNT) (CIK 0001460329) (FLNT) — Mar 26, 2012
Fluent, Inc. (FLNT) (CIK 0001460329)
Date: March 26, 2012 · CIK: 0001460329 · Accession: 0000000000-12-015312
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-158336
Referenced dates: February 22, 2012
Letter
March 26, 2012 Via E-mail Wilfred Chow Chief Financial Officer SearchMedia Holdings Limited Floor 13, Central Modern Building 468 Xinhui Road Shanghai, China 200060
Re: SearchMedia Holdings Limited Form 20-F for the fiscal year ended December 31, 2010 Filed June 30, 2011 Response dated March 13, 2012 File No. 333-158336
Dear Mr. Chow: We have reviewed your filing and have the fo llowing comments. Please provide us with the requested information so we may better understand your disclosure.
Please respond to this letter within te n business days by providing the requested information or by advising us when you will provide the requested response. If you do not believe our comments apply to your facts and circum stances, please tell us w hy in your response. After reviewing the information you provide in response to these comments, we may have additional comments. Form 20-F for the Fiscal Year Ending December 31, 2010
General
1. We note that in your respons e letter filed as correspondence on EDGAR on March 13, 2012, that you indicate that you will provide the supplemen tal disclosure in future filings. Please note our commen ts primarily requested revision and filing of an amended Form 20-F. Please confirm that at upon th e compliance with comments issued during this review, you will file an amended Form 20-F including all revised disclosure as appropriate.
Wilfred Chow SearchMedia Holdings Limited March 26, 2012 Page 2
Risk Factors, page 6
Unauthorized use of our intellectual property by third parties, and the expenses…, page 13
2. We note your response to comment 3 from our letter dated February 22, 2012. Please revise your disclosure to state with specificity, the process for registering in China the “SearchMedia” trademark and logo used in your business, the steps and process involved with the registration of each, the actions and dates of your registration steps to date and an outline with time frame for completion of same. In this discussion, please include all relevant PRC rules, regulations, circulars and entities involving same and any challenges to the registration of the trademark and l ogo that could compromise your ability to register them for your use.
3. We note your disclosure that “some of [y]our pending applications or registrations may be successfully challenged or invalidated by others.” Plea se expand your disclosure to explain if there are any othe r pending applications or re gistration separate from your registration of the SearchMe dia trademark and logo used in your business and discuss any challenges to them or invalidation attempts by third parties.
Item 4. Information on the Company, page 24
History and Development, page 24
4. We note your response to comment 11 from our letter dated February 22, 2012. Please revise your disclosure to include your res ponse to comment 11 from your response dated March 13, 2011. Additionally, provide full and complete explanation of any entities you control or use as part of your ope rations including inactive entities. Our Business, page 26
General
5. We note your response to comment 12 from our letter dated February 22, 2012 including how the majority of your media assets are pos ter frames “owned by business partners.” Please tell us more about these business part ners including who th ey are, whether you control these entities, have any related party relationships with those individuals or entities that do control these business partners and whether there are written agreements in place governing thes e relationships. Further, disc lose any potential conflict or competing interest stemming from you sell ing both SearchMedia Holdings’ and other business partners’ in-elevator media assets as an agent to both. De scribe the assets you sell for the parties involved. Revise your disclosure accordingly.
Wilfred Chow SearchMedia Holdings Limited March 26, 2012 Page 3
Liquidity and Capital Resources, page 54
6. We note your response to comment 17 from our letter dated February 22, 2012. Revise to include the contingent consideration ta ble with reference to specific acquisitions, adding a column for contingent considerati on paid up to December 31, 2010 as requested in our original comment. 7. We note your response to comment 18 from our letter dated February 22, 2012 and reissue in part. Amend your disclosure to include the names of the “ex-owners” that will continue to receive the remaining conti ngent consideration payments, matching the names of the ex-owners to the entities for wh ich they continue to receive payments.
Financial Statements
4. Acquisitions, page F-18
I. 2010 acquisitions, page F-18
8. We note your response to comment 24 from our letter dated February 22, 2012. Tell us in more detail how you determined the fair value of the contin gent consideration including, but not limited to, the valuati on technique used and how you evaluated the probability of achieving the required fi nancial performance under the earnout agreements. II. 2008 Acquisitions, page F-19
9. We note your response to comment 26 from our letter dated February 22, 2012. For each acquisition where you recorded an impairmen t of goodwill right after you recorded the contingent consideration, please reconcile th e metrics you used to record the contingent consideration with the fair value of the re spective reporting unit used to determine the goodwill impairment. 10. We note your response to comment 29 from our letter dated February 22, 2012. For each acquired subsidiary, please provide us with a detailed analysis on how you considered each of the factors in ASC 805-10-55-25 in your conclusion that the contingent consideration arrangements are not compensatory arrangements.
11. We note your response to comment 31 from our letter dated February 22, 2012. For each acquired subsidiary, please tell us: i. the names of the ex-owner, the job position in your company after the acquisition and the salary;
Wilfred Chow SearchMedia Holdings Limited March 26, 2012 Page 4
ii. the term of each of the employment agreements; iii. whether the ex-owners have to continue working with the company to get the contingent consideration; iv. what will happen if the ex-owner quit working for your company after the first year, will they be entitled to receive the contingent payments?
12. Refer to your disclosure in the third paragraph of page F-19.
i. Explain to us why the amendments of the earnout agreements also provided for the extension of the employment ag reements of certain key members of management of these subsidiaries. ii. Tell us who are the key memb ers of management and th e related subsidiary.
iii. Tell us how you considered the relations hip between these agreements in your conclusion that the contingent c onsideration arrangements are not compensatory arrangements.
13. Refer to your disclosure in the fourth para graph of page F-19. Tell what you mean by:
i. “[P]rovide guarantee on the realizable price of these stocks based on the financial performance of these companies.” ii. “As of December 31, 2010, the Company did not recognize the put options under these agreements as th e subsidiaries did not meet the required financial performance.”
14. We note your response to comment 32 from our letter dated February 22, 2012. Please explain to us how the equity holders of th e operating companies were the same holders before and after the establishment of the VIE structure. 15. We note your response to comment 32 from your letter dated February 22, 2012. Tell us in more detail the reasons why it was nece ssary to extend the loans to the equity shareholders of the VIE. 16. We note your response to comment 33 fr om our letter dated February 22, 2012. Regarding your acquisition in 2010, will the acquisition be rescinded if the earnout provisions are not met?
Wilfred Chow SearchMedia Holdings Limited March 26, 2012 Page 5
Form 6-K Filed February 8, 2012
17. We note your response to comment 35 from our letter dated February 22, 2012. Please tell us the date of the SAIC business license which specifically includes a dvertising. In future filings, please file this license as an exhibit.
You may contact Ivette Leon, Assistant Chief Accountant, at 202-551-3351 or Carlos Pacho, Senior Assistant Chief Accountant, at 202-551-3835 if you have questions regarding comments on the financial statements and rela ted matters. Please contact Kate Beukenkamp, Attorney Advisor, at 202-551-6971 or Celeste M. Murphy, Legal Branch Chief, at 202-551-3257 with any other questions. Sincerely, /s/ Celeste M. Murphy for Larry Spirgel Assistant Director
cc: Via E-mail
Joshua Weingard Corporate Counsel
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March 26, 2012 Via E-mail Wilfred Chow Chief Financial Officer SearchMedia Holdings Limited Floor 13, Central Modern Building 468 Xinhui Road Shanghai, China 200060 Re: SearchMedia Holdings Limited Form 20-F for the fiscal year ended December 31, 2010 Filed June 30, 2011 Response dated March 13, 2012 File No. 333-158336 Dear Mr. Chow: We have reviewed your filing and have the fo llowing comments. Please provide us with the requested information so we may better understand your disclosure. Please respond to this letter within te n business days by providing the requested information or by advising us when you will provide the requested response. If you do not believe our comments apply to your facts and circum stances, please tell us w hy in your response. After reviewing the information you provide in response to these comments, we may have additional comments. Form 20-F for the Fiscal Year Ending December 31, 2010 General 1. We note that in your respons e letter filed as correspondence on EDGAR on March 13, 2012, that you indicate that you will provide the supplemen tal disclosure in future filings. Please note our commen ts primarily requested revision and filing of an amended Form 20-F. Please confirm that at upon th e compliance with comments issued during this review, you will file an amended Form 20-F including all revised disclosure as appropriate. Wilfred Chow SearchMedia Holdings Limited March 26, 2012 Page 2 Risk Factors, page 6 Unauthorized use of our intellectual property by third parties, and the expenses…, page 13 2. We note your response to comment 3 from our letter dated February 22, 2012. Please revise your disclosure to state with specificity, the process for registering in China the “SearchMedia” trademark and logo used in your business, the steps and process involved with the registration of each, the actions and dates of your registration steps to date and an outline with time frame for completion of same. In this discussion, please include all relevant PRC rules, regulations, circulars and entities involving same and any challenges to the registration of the trademark and l ogo that could compromise your ability to register them for your use. 3. We note your disclosure that “some of [y]our pending applications or registrations may be successfully challenged or invalidated by others.” Plea se expand your disclosure to explain if there are any othe r pending applications or re gistration separate from your registration of the SearchMe dia trademark and logo used in your business and discuss any challenges to them or invalidation attempts by third parties. Item 4. Information on the Company, page 24 History and Development, page 24 4. We note your response to comment 11 from our letter dated February 22, 2012. Please revise your disclosure to include your res ponse to comment 11 from your response dated March 13, 2011. Additionally, provide full and complete explanation of any entities you control or use as part of your ope rations including inactive entities. Our Business, page 26 General 5. We note your response to comment 12 from our letter dated February 22, 2012 including how the majority of your media assets are pos ter frames “owned by business partners.” Please tell us more about these business part ners including who th ey are, whether you control these entities, have any related party relationships with those individuals or entities that do control these business partners and whether there are written agreements in place governing thes e relationships. Further, disc lose any potential conflict or competing interest stemming from you sell ing both SearchMedia Holdings’ and other business partners’ in-elevator media assets as an agent to both. De scribe the assets you sell for the parties involved. Revise your disclosure accordingly. Wilfred Chow SearchMedia Holdings Limited March 26, 2012 Page 3 Liquidity and Capital Resources, page 54 6. We note your response to comment 17 from our letter dated February 22, 2012. Revise to include the contingent consideration ta ble with reference to specific acquisitions, adding a column for contingent considerati on paid up to December 31, 2010 as requested in our original comment. 7. We note your response to comment 18 from our letter dated February 22, 2012 and reissue in part. Amend your disclosure to include the names of the “ex-owners” that will continue to receive the remaining conti ngent consideration payments, matching the names of the ex-owners to the entities for wh ich they continue to receive payments. Financial Statements 4. Acquisitions, page F-18 I. 2010 acquisitions, page F-18 8. We note your response to comment 24 from our letter dated February 22, 2012. Tell us in more detail how you determined the fair value of the contin gent consideration including, but not limited to, the valuati on technique used and how you evaluated the probability of achieving the required fi nancial performance under the earnout agreements. II. 2008 Acquisitions, page F-19 9. We note your response to comment 26 from our letter dated February 22, 2012. For each acquisition where you recorded an impairmen t of goodwill right after you recorded the contingent consideration, please reconcile th e metrics you used to record the contingent consideration with the fair value of the re spective reporting unit used to determine the goodwill impairment. 10. We note your response to comment 29 from our letter dated February 22, 2012. For each acquired subsidiary, please provide us with a detailed analysis on how you considered each of the factors in ASC 805-10-55-25 in your conclusion that the contingent consideration arrangements are not compensatory arrangements. 11. We note your response to comment 31 from our letter dated February 22, 2012. For each acquired subsidiary, please tell us: i. the names of the ex-owner, the job position in your company after the acquisition and the salary; Wilfred Chow SearchMedia Holdings Limited March 26, 2012 Page 4 ii. the term of each of the employment agreements; iii. whether the ex-owners have to continue working with the company to get the contingent consideration; iv. what will happen if the ex-owner quit working for your company after the first year, will they be entitled to receive the contingent payments? 12. Refer to your disclosure in the third paragraph of page F-19. i. Explain to us why the amendments of the earnout agreements also provided for the extension of the employment ag reements of certain key members of management of these subsidiaries. ii. Tell us who are the key memb ers of management and th e related subsidiary. iii. Tell us how you considered the relations hip between these agreements in your conclusion that the contingent c onsideration arrangements are not compensatory arrangements. 13. Refer to your disclosure in the fourth para graph of page F-19. Tell what you mean by: i. “[P]rovide guarantee on the realizable price of these stocks based on the financial performance of these companies.” ii. “As of December 31, 2010, the Company did not recognize the put options under these agreements as th e subsidiaries did not meet the required financial performance.” 14. We note your response to comment 32 from our letter dated February 22, 2012. Please explain to us how the equity holders of th e operating companies were the same holders before and after the establishment of the VIE structure. 15. We note your response to comment 32 from your letter dated February 22, 2012. Tell us in more detail the reasons why it was nece ssary to extend the loans to the equity shareholders of the VIE. 16. We note your response to comment 33 fr om our letter dated February 22, 2012. Regarding your acquisition in 2010, will the acquisition be rescinded if the earnout provisions are not met? Wilfred Chow SearchMedia Holdings Limited March 26, 2012 Page 5 Form 6-K Filed February 8, 2012 17. We note your response to comment 35 from our letter dated February 22, 2012. Please tell us the date of the SAIC business license which specifically includes a dvertising. In future filings, please file this license as an exhibit. You may contact Ivette Leon, Assistant Chief Accountant, at 202-551-3351 or Carlos Pacho, Senior Assistant Chief Accountant, at 202-551-3835 if you have questions regarding comments on the financial statements and rela ted matters. Please contact Kate Beukenkamp, Attorney Advisor, at 202-551-6971 or Celeste M. Murphy, Legal Branch Chief, at 202-551-3257 with any other questions. Sincerely, /s/ Celeste M. Murphy for Larry Spirgel Assistant Director cc: Via E-mail Joshua Weingard Corporate Counsel