Pre-Effective Amendment to Registration of Securities of a Small-Business Issuer — Form SB-2 Filing Table of Contents
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Securities of a Small-Business Issuer
6: CORRESP ¶ Comment-Response or Other Letter to the SEC HTML 74K
2: EX-2.2 Plan of Acquisition, Reorganization, Arrangement, HTML 742K
Liquidation or Succession
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4: EX-23.3 Consent of Experts or Counsel HTML 8K
5: EX-23.4 Consent of Experts or Counsel HTML 7K
Delayed-Release ‘CORRESP’ — Comment-Response or Other Letter to the SEC
On
behalf
of the Company, we are hereby enclosing two copies of Amendment No. 2 to the
Company’s registration statement on Form SB-2 (the “Registration Statement”)
that was filed initially on May 22, 2007.
By
letter
dated August 8, 2007, the staff of the Securities and Exchange Commission (the
“Staff”) issued comments on Amendment No. 1 to the Registration Statement that
was filed on July 25, 2007. Following are the Company’s responses to the Staff’s
comments. For ease of reference, each response is preceded by the Staff’s
comment.
OutsideBack
CoverPage
ofProspectus
1.We
reissue prior comment 2. Please note that the delivery obligation applies to
all
dealers, whether or not participating in this offering. And this is in addition
to the dealers’ obligation to deliver a prospectus when acting as underwriters.
Please include the dealer prospectus delivery obligation language required
by
Item 502(b) of Regulation S-B.
The
Company has added language in accordance with the Staff’s comment. See the back
cover of the prospectus.
Prospectus
Summary, page 1
2.In
response to our prior comment 5, you state that you believe you have the first
mover advantage in 3-D sonar markets based on, among other things, extensive
and
successful testing in this area that date back almost two decades as well as
broad customer acceptance. We note, however, that your company was formed in
1994 and the disclosure on page 19 states that 3-D sonar is “currently in the
early stages of adoption....“ Please discuss in greater detail, in the business
section, your extensive and successful testing in this area that dates back
two
decades as well as your broad customer acceptance.
The
Company has made revisions in accordance with the Staff’s comment. See page 19
of the Registration Statement.
3.Please
also clarify & here that you do not have any government sales in the US nor
do you have any port security solution contracts.
The
Company advises the Staff that it recently received an order from the U.S.
Department of Defense to build and deliver next- generation Underwater
Inspection Systems for the U.S. Coast Guard and other potential users, to enable
rapid underwater searches in ports and waterways. Disclosure to that effect
has
been added to pages 16 and 23 of the Registration Statement. In addition, and
as
a point of clarification, as previously disclosed on Page 4 of the Registration
Statement, the Company advises the Staff that its wholly-owned subsidiary,
Colmek, has been selling products to U.S. government entities for a number
of
years.
4.We
reissue prior comment 6, in part. Please disclose the amount of your working
capital and the amount of your accumulated deficit.
The
Company has made revisions in accordance with the Staff’s comment. See
page 1 of the Registration Statement.
Management’s
Discussion and Analysis orPlan
ofOperation.
page 9
Liquidityand
Capital Resources. page 16
5.We
note your plan to move from loss to profit in the short term involves completing
your first government sales in the US and gain your first port security solution
contract. Please tell us the status of the progress of the US government sales
and the port security solution contract.
See
the
Company’s response to comment 3. The Company has added disclosure in accordance
with the Staff’s comment.
6.We
reissue prior comment 22. We note that there is a 4.9% ownership limitation
with
each of the beneficial owners, but the limitation may be changed to 9.9%. Please
advise whether and how you will update the beneficial ownership table after
the
registration statement is declared effective.
The
Company advises the Staff supplementally that it intends to file a prospectus
supplement to update for changes in the beneficial ownership
disclosures.
7.We
reissue prior comment 23. Please provide the approximate dollar value of the
amount of Vision Opportunity’s interest in the repurchase of 18,181 shares of
Series B Preferred Stock, including the fair value of the warrants that were
issued but remain in Vision’s ownership. And again, please revise all related
party transactions to disclose the approximate dollar value of the amount of
the
related party’s interest in the transaction. See Item 404(a)(6) of Regulation
S-B.
The
Company has made revisions in accordance with the
Staff’s comment. See pages 47-49 of the Registration
Statement.
8.As
a follow up to the comment above, please explain why the company repurchased
the
18,181 shares from Vision and why it paid approximately $1.8 million dollars
more than the aggregate purchase price Vision paid for the shares. Please
disclose what consideration, if any, the company received for the $1.8 million
dollars. Please provide any other information regarding the transaction that
is
material to investors in light of the circumstances of the transaction. Refer
to
Item 404(a)(6) of Regulation S-B.
The
Company advises the Staff supplementally that the $1.8 million figure as the
excess of the repurchase amount over the purchase price referred to in this
comment is apparently based on a typographical error in the Registration
Statement. The amount paid by Vision at the time of the purchase of the shares
of Series B Preferred Stock that were subject to the repurchase was $1,818,
100
and not
$181,800. The Company has corrected the disclosure. See page 47 of the
Registration Statement. As described on page 47 of the Registration Statement,
the repurchase of the shares of Series B Preferred Stock was required to be
made
under the terms of the Company’s private offering completed in April 2007.
9.Please
clarify how Ulysses Financial LLC is related. Also, disclose the two officers
for the issuance of 164,000 shares of your common stock in April 2007 and
clarify whether the 5 year warrants are for each to purchase 164,000 shares.
If
not, please disclose the shares each is allowed to purchase under the
warrants.
As
a
result of the Staff’s comment, the Company has revisited this disclosure and has
concluded that Ulysses is not a related party. Accordingly, the Company has
deleted the reference to this entity.
10.We
bring your attention to Note 9 of the financial statements. Please disclose
the
related transactions or advise why they need not be
disclosed.
In
accordance with the Staff’s comment, the Company has added disclosure to the
related party section that breaks out the disclosures contained in footnote
9.
See page 48 of the Registration Statement.
Financial
Statements asofOctober31,2006
Note
10- Acquisition. page F-14
11.We
note the response to our prior comment 30 and your belief that the material
identifiable assets in the Martech acquisition did not meet the separability
criteria for recognition apart from goodwill and other identifiable intangibles,
such as customer and supplier related relationships, that would be recognized
separately were immaterial. As Martech is a contract-based business, it is
unclear whether you specifically considered the amount of order or production
backlog that existed at the date of acquisition for recognition as an intangible
asset apart from goodwill. Please refer to the guidance in Appendix A (paragraph
A.14.b(2)) of SPAS 141, Notwithstanding your response, please expand the notes
to the financial statements to discuss management’s evaluation of identifiable
intangible assets that would be recognized apart from goodwill and your
conclusions, thereto, Please advise and revise your consolidated financial
statements, accordingly.
The
Company advises the Staff that it has reviewed paragraph A.14.b(2) of Appendix
A
of FAS No. 141 and in connection with assessing whether the acquisition of
Martech included production or order backlog that may be considered an
identifiable intangible asset subject to amortization. The Company carefully
considered the order backlog that existed at the time of the acquisition and
concluded the value of the backlog was immaterial to the aggregate purchase
price.
The
Company has added disclosure to Footnote 10 to the financial statements. See
page F-15 of the Registration Statement.
12.In
view of the material amount of cash & cash equivalents that comprise
approximately 35% of your total assets at April 30, 2007, please expand the
note
to detail the nature of the cash equivalent assets included in this balance
sheet account as well as any risks (fair value, credit, etc.) associated with
these assets.
The
Company has expanded the footnote in accordance with the Staff’s comment. In
addition, please note the disclosures under Note 1, Summary of Accounting
Policies that discloses the Company’s policies for accounting for cash, cash
equivalents and concentrations of credit risk.
Note
3 —Intangible
Assets and Goodwill, page F-24
13.We
note your reference to an independent consultant and/or appraiser that was
used
to determine the fair values of your acquired assets, intangibles and goodwill,
both herein and in Note 10. If management prefers to make reference to a
specialist, please identify the consultants in the “Experts” section of the
document and include their consent in the document. In the alternative, you
may
delete the reference to the independent appraiser.
The
Company has deleted references to an independent appraiser. See pages F-24
and
F-28.
14.Reference
is made to your response to our prior comment 41 where you believe that your
accounting is reasonable and in accordance with GAAP. We do not concur, as
the
guidance you cite in APBO No. 6, paragraph 12(b), presumes that the treasury
stock transaction is with an “unrelated” shareholder with no exchange of stated
or unstated rights or privileges. As this transaction occurred with officers
of
the company that provide services there is a presumption of a compensatory
arrangement when there is a difference between the value of shares issued and
the lesser amount being paid by the shareholder/officer for those shares. In
this regard, the significant discount in the amount being paid would be
attributable to the exchange of stated or unstated rights or privileges for
providing services to the company and we believe should be recognized as
compensation expense. With respect to accounting literature that supports this
position, please refer to the guidance in paragraph 15 of SFAS No. 123(R) on
the
Measurement Principle for Share-Based Payment Transactions with Employees.
In
addition, we also refer you to guidance in Question I of FT B 85-6 where you
account for stated or unstated rights or privileges when purchase of treasury
shares are at a price significantly in excess of market value, as it presumes
the price includes amounts attributable to other items. A similar analogy is
made when issuing shares at an amount significantly less than its value to
officers that provide services. Therefore, we reissue our comment, as previously
cited, to revise your financial statements accordingly in an amendment to the
Form SB-2. Please refer to our prior comment on the guidance for the appropriate
note disclosure and recognition in the auditor’s report that should be made with
respect to the change in financial statements. Please revise,
accordingly.
The
Company has reclassified the treasury stock transaction as compensatory and
charged the fair value of the shares issued to operations. As the Company was
privately-held, management used $5,400 per share as the fair value of the shares
issued. This was based upon a transfer of common shares for cash consideration
between the Company and one the Company’s founders during the year ended October31, 2006. While the Company acknowledges the transaction was between related
parties, the Company believes the price per share utilized represents a fair
value for the Company at the time of the transaction and approximates the third
party valuation of the Company at the time of sale to Coda Octopus. As a result,
the Company incurred an aggregate charge to operations of $226,800, i.e. 42
shares @ $5,400/ share, of which $132,300 was charged in fiscal 2006 and $94,500
was charged during the three months ended January 31, 2007 at the time the
debt
was forgiven.
The
Company has included restated Miller & Hilton, Inc. October 31, 2006 and
2005 financial statements, accompanied by a revised auditors
report.
15.From
disclosure noted in the Statement of Cash Flows and note 5 (pages F-62 and
F-65,
respectively), it appears the forgiveness of the related notes receivable of
$94,500 has been reflected in Colmek’s operating results for the three months
ended January 31, 2007. In view of this amount being material, please also
separately
present a line item for this expense within “Operating Income” and more
appropriately characterize the caption as “Non-Cash Officer Compensation
Expense”. Please revise the Condensed Statement of Operations,
accordingly.
The
Company has revised the Miller & Hilton, Inc. January 31, 2007 Condensed
Statement of Operations to present a line item for non- cash officer
compensation in the amount of $94,500.
16.As
you have included updated April 30, 2007 financial statements in the amended
Form SB-2, please also update the pro forma statements in a similar manner,
as
follows:
(A)
CondensedProFormaBalanceSheetasofApril30.2007
(Replacing
the January 31, 2007 Pro Forma Balance
Sheet)
In
deriving the updated pro forma balance sheet and its results thereto, please
solely
reflect the registrant’s (Coda) historical balance sheet as of April 30, 2007
with the May 2007 Security Transactions (and any other material subsequent
transactions), as the April 2007 Colmek acquisition and the March & April
2007 Security Transactions are already reflected in Coda’s April 30, 2007
historical balance sheet.
(B)
Condensed
Pro Forma Statement of Operations — Six Mos. Ended April 30,2007
(Replacing
the January 31, 2007 (3 Months) Pro Forma Statement of
Operations)
The
updated statement of operations should reflect the impact of all transactions
(e.g. Colmek Acquisition, Other Security Transactions, etc.) giving effect
as if
the transactions had taken place as of November 1, 2005, the beginning of the
fiscal year.
In
presenting the pro forma statement for this interim period, please use Coda’s
historical results for its six months ended April 30, 2007 and the historical
pre-acquisition results of Colmek for the period November 1, 2006 to April6,2007 (date of acquisition), as Coda’s historical results already include Colmek
from its April 6, 2007 acquisition date.
Please
refer to the guidance in Rule 11 -02(c)(l)-(2) of Regulation S-X. Please revise
and update the condensed pro forma statements including its related note
disclosures (with this respective updated interim period)
accordingly.
In
accordance with the Staff’s comment, the Company has prepared and included in
the Registration Statement a Condensed Pro Forma Balance Sheet as of April30,2007 and a Condensed Pro Forma Statement of Operations for the six months ended
April 30, 2007.
Pro
FormFinancial
Statements, pageF-72
17.Reference
is made to your response to our prior comment 46 where you state that a footnote
is included reconciling Martech financial information from pound sterling to
US
dollar translation basis amounts. We reissue our comment, so please include
a
separate detailed note that presents the reconciliation of Martech’s financial
information from its historical basis in pound sterling to amounts presented
in
the pro forma statement of operations on a US dollar basis with appropriate
disclosure of the weighted average exchange rate used in the translation. Please
revise accordingly.
In
accordance with the Staff’s comment, the Company has added footnote 5 to the pro
forma financial statements to show the reconciliation from pound sterling to
US
dollars.
18.With
regard to our comment number 49 from the staff letter dated June 18, 2007,
it is
not apparent that you have adjusted the pro forma income statement for the
tax
effects of the pro forma adjustments. Please revise or, if applicable, explain
your conclusion that no adjustments are necessary.
In
accordance with the Staff’s comment, the Company has added footnote 4 to the pro
forma financial statements to show the tax effects of the
adjustments.
General
19.Please
consider the financial statement updating requirements of Item 310(g) in
Regulation S-B on an ongoing basis. In this regard, please note that, when
additional financial statements are filed in an amendment, the staff may require
significant additional time to review the amendment.
The
Company has taken note of the Staff’s comment and will update the financial if
and when required.
20.In
all amendments to the Form SB-2, please include a currently dated and manually
signed consent from all independent public accountants.
The
Company has included updated consents in the Registration
Statement.
Item
27 Exhibits
21.Exhibit
2.2 is shown as filed with this amendment, however it is not filed on Edgar.
Please file the exhibit or advise.
The
Company has added the exhibit in accordance with the Staff’s
comment.
Signature
Page
22.Please
have one of your officers sign in the capacity of principal accounting
officer.
The
Company has added the title to its chief financial officer in accordance with
the Staff’s comment.
Please
contact the undersigned at 212-981-6766 with any questions or comments you
may
have with respect to the foregoing.
Very
truly yours,
/s/
Louis A. Brilleman
Dates Referenced Herein and Documents Incorporated by Reference
