September
29, 2009
Via EDGAR and Federal
Express
Securities
and Exchange Commission
450 Fifth
Street, N.W.
Washington,
D.C. 20549
|
Attention:
|
Andrew Schoeffler, Senior Staff
Attorney
|
|
RE:
|
SSGI
Inc.
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|
|
Registration
Statement on Form S-1 (File No.
333-160700)
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Ladies
and Gentlemen:
On behalf
of SSGI, Inc., I am submitting this letter in response to the comment letter of
the staff of the Securities and Exchange Commission (the “Commission”), dated
August 11, 2009, regarding SSGI’s registration statement on Form S-1, dated July
17, 2009. Amendment No. 1 to the registration statement was
transmitted via EDGAR today, September 29, 2009, which includes changes made to
the registration statement in response to the staff’s comments.
This
letter recites below each comment of the Commission numbered in accordance with
the comment letter and, following each comment, sets forth our
response.
1. We
note that you are registering a significant number of shares of common stock to
be sold by persons and entities that are affiliates of the company. Given the
size of the offering relative to the number of shares outstanding held by
non-affiliates, the nature of the offering, and the selling shareholders, this
transaction appears to be a primary offering of your shares to the public, with
the selling shareholders acting as the conduits in that distribution to the
public. Please provide us with a detailed analysis as to why the proposed
offering is not a primary offering on your behalf and should be appropriately
characterized as a transaction eligible to be made under Rule 415(a)(1)(i) of
Regulation C under the Securities Act. We may have further comment after
reviewing your response.
The
Company has revised the size of the offering and the selling shareholder
table. Included within the amended registration the Company proposes
that non-affiliates will have 75% of their shares of common stock registered
while affiliates will have 10% of their shares of common stock
registered. Thus the Company seeks to register 7,239,446 shares of
common stock of which 2,860,666 shares are held by affiliates of the
Company. Currently the company has 34,687,630 shares of common
stock issued and outstanding of which 6,080,964 is held by
non-affiliates. The Company believes that the offering, as amended,
is not a primary offering and should be characterized as a transaction eligible
to be made under Rule 415(a)(1)(i) pursuant to the following
analysis.
Size of
the Offering Being Registered.
It is the
Company’s understanding that offerings of shares by affiliates representing more
than half of the issuer’s public float (shares held by non-affiliates;
6,080,964) would likely be considered a primary offering. Pursuant to
the amended offering, the number of shares held by affiliates of the Company is
47% of the total number of shares held by non-affiliates of the Company
(2,860,666/6,080,964 = 0.47) which is less than the 50% threshold.
Indicia
of Control
It is the
Company’s understanding that indicia of control by the selling stockholders,
including any board representation or other contractual provisions enabling
control of the issuer; the more control, the more likely the resale offering
would be viewed as a primary offering. Pursuant to the amended
offering, the number of shares being registered by non-affiliates is 60.5% of
the total number of shares being offered. Thus the Company’s amended offering
does not have the requisite indicia of control to be viewed as a primary
offering.
View towards
Distribution
Additionally,
another issue is the extent to which selling stockholders have a view towards
distribution of the securities; the sooner investors are able to resell their
securities after their issuance, the more likely the transaction would be viewed
as a primary offering. The majority of the shares to be registered by the
Company pursuant to the amended offering were purchased in March
2008. Only 15,000 shares of common stock of the Company have been
issued within the last twelve month period (January 2009). Thus the
requisite investment intent of each of the shareholders has been
met.
Based
upon the foregoing analysis, the Company believes that the offering, as amended,
is not a primary offering and should be characterized as a transaction eligible
to be made under Rule 415(a)(1)(i)
2. Revise
to update your financial statements for June 30, 2009 in accordance with
Rule
8-08 of Regulation S-X.
The
financial statements for June 30, 2009 have been included within the amended
registration statement.
3. We
note your 2007 Share Exchange which resulted in a reverse merger being effected
in February 2008. Please tell us how you have accounted for this transaction as
a reverse merger, specifically confirming that the historical financial
statements are that of Surge Solutions and addressing how your statement of
changes in stockholders' deficit appropriately reflects the share
exchange.
The
Company’s historical financial statements, as presented in Form S-1, are
representative of Surge Solutions Group, Inc., the wholly owned subsidiary of
the Company. The Company issued 33,025,000 shares of its common stock, which
represented 98.8% of its issued and outstanding shares, to the stockholders of
Surge Solutions Group, Inc. in exchange for 100% of Surge Solutions Group. The
remaining 1.2% of the Company’s common stock was retained by the existing
stockholders. The Company recorded the share exchange as a 1 for 1 exchange
where the par value of Surge Solutions Group and the Company, Inc were the same
for each company. On the financial statements of the Company, an entry was
posted that decreased the common stock account for the reverse split of the
common stock with a corresponding increase in additional paid-in-capital in the
same amount. The Company then posted an entry to increase to common stock
account with a corresponding decrease to additional paid in capital for the
issuance of the new shares to Surge Solutions Group, resulting in a zero net
effect on the statement of changes in stockholder’ deficit. The Company’s total
stockholders’ equity (deficit) was zero at the time of the share exchange
agreement.
Cover
Page of Registration Statement
4. We
note the disclosure on the cover page that your primary standard industrial
classification code number is 1542. Our records indicate that your code number
should be 1540. Please advise or revise accordingly.
The
registration statement has been revised accordingly.
5. Please
revise the calculation of registration fee table footnotes to clearly indicate
how you determined the "proposed maximum offering price per share" and the
specific provision of Rule 457 of Regulation C under the Securities Act that you
relied upon to calculate the "amount of registration fee."
The
proposed maximum offering price was determined pursuant to Rule 457(c) of
Regulation C. The last sale price of common stock of the issuer was $0.51 as of
September 24, 2009. The footnote within the registration statement has been
revised accordingly.
Cover
Page of Prospectus
6. We
note that you have omitted the information regarding the price at which the
shares will be sold until quoted on the OTC Bulletin Board. Please be advised
that this information must be included in the prospectus before the registration
statement is declared effective.
The registration statement has been
amended accordingly.
Prospectus
Summary, page 4
7. Please
disclose in this section that you have a received a going concern opinion from
your auditor.
The
Company has revised the opening paragraph of the Prospectus Summary to include
reference to the Company’s independent registered public accounting firm’s
report regarding the issuance of a going concern opinion for the years ended
December 31, 2008 and 2007.
8. To
the extent applicable, please comply with each of the following comments on the
"Prospectus Summary" section in the appropriate sections in the body of the
prospectus.
The registration statement has been
revised accordingly.
Our
Company, page 4
9. We
note the disclosure in the first and second introductory paragraphs and have the
following comments:
Please
revise to clearly explain your corporate history. In this regard we note that it
is difficult to understand the development of your company as currently drafted,
including which entities conducted which business and how the various mergers
and acquisitions and name changes impacted the business.
This
disclosure is too detailed for summary disclosure. Please revise to briefly and
clearly explain your corporate history and relocate the more detailed discussion
to the body of the prospectus. We also note that this disclosure repeats the
disclosure under "Corporate Information" on page 6.
Please
discuss the fact that your predecessor company was a reporting company under the
Exchange Act and deregistered in 2005.
The
Company has noted your comments concerning the discussion of the Company’s
corporate history and have made changes to the appropriate sections to more
clearly discuss the Company’s history. The summary disclosure has been rewritten
and has been included in the appropriate sections and the Company has disclosed
that the Company’s predecessor company was a reporting company and was
deregistered in 2005.
10. We
note the disclosure in third and fourth introductory paragraphs. In plain
English, please briefly and clearly explain your line(s) of business,
location(s) of operations, and principal product(s) and service(s).
The
registration statement has been revised to more clearly discuss the Company’s
three lines of business, the locations of the Company’s operations and the
Company’s products and services.
Markets,
page 5
11. Please
disclose the percentage of your revenues represented by each of the four lines
of business in which you operate.
The
registration statement has been revised to disclose the percentages of the
Company’s revenues of the Company’s three business lines.
12. The
disclosure in this section discusses only three of the lines of business. Please
revise to discuss the fourth line of business - installation services for large
scale national home improvement chains. Further, disclosure elsewhere in the
prospectus indicates that you only operate in three lines of business. Please
reconcile.
The
Company has reconciled that the Company has three main lines of business and
have revised the Company’s disclosure under the “Markets” heading to more fully
discuss these lines of business.
13. In
discussing each of the lines of business in which you operate, please identify
the geographic regions for each.
The
Company has revised the Company’s discussion of the Company’s three lines of
business to indicate that we are only operating in the State of Florida and that
the Company is in the process of obtaining the authority to conduct business in
the State of Georgia.
Insurance
Restoration, page 5
14. Please
explain in greater detail what it means to be a "preferred contractor" and
whether this designation makes you a preferred contractor for all insurance
companies or only certain insurance companies. If the latter, please disclose
the insurance companies for which you are a preferred contractor.
The
Company has revised the Company’s discussion of a “preferred contractor” and
that the preferred contractor status is only with one insurance
company.
15. Please
explain what you mean by "in-house crews" and explain how this is different from
your normal operations. In this regard, we note that you disclose that you use
these crews for "specialized" remediation and restoration services.
The
Company has included a discussion of the meaning of “in-house crews” with an
explanation of what this means with respect to the Company’s normal operations.
The Company has removed the reference to “specialized” remediation and
restoration services.
Petroleum
Contracting Specifically Relating to Government Mandates, page 5
16. Please
explain the Xerxes system and how it complies with the legislative mandate, and
provide support for the claim "that Surge has a competitive advantage with
compliance upgrades by utilizing a Xerxes secondary containment system to
provide an alternative to full tank replacement."
The
Company has revised the explanation of the Company’s petroleum contracting
discussion to include an explanation of the Xerxes system and explained why it
is an acceptable alternative for owners to comply with the legislative mandate.
The Company has also discussed why the Xerxes system gives the company a
competitive advantage as opposed to full tank replacement.
New
Construction Commercial, Industrial and Retail page 6
17. Please
explain in greater detail the business conducted by this line of business and
how you are a "single source turn-key solution" for customers.
The
Company has revised the discussion in the amended registration
statement in greater detail concerning its line of business and
further explained how we are a turn-key solution.
Risk
Factors, page 7
18. Each
subheading throughout this section states a fact and then there are multiple
risks disclosed in the paragraphs below the subheading. Please revise to
disclose each risk below its own subheading. In revising this section, please
ensure that each subheading clearly discloses the risk, rather than merely
stating facts.
The
Company has revised the subheadings to disclose each risk factor below its own
sub heading to ensure that each subheading discloses the risk.
19. Certain
of your risk factors contain language such as "we cannot assure," "we cannot be
sure," and "there can be no assurance." The risk factors must discuss the nature
of the specific risk, rather than your ability to provide assurances. Please
remove all such disclosure and revise your risk factors accordingly to address
the particular risk, rather than your ability to offer assurances.
The
Company has removed all language such as "we cannot assure," "we cannot be
sure," and "there can be no assurance." and revised the risk factors accordingly
to address the particular risk.
20. Many
of the risk factors in this section discuss facts but do not then explain how
those facts translate into risks to investors. Please review the risk factors in
this section and ensure that you provide sufficient disclosure explaining the
risks to investors.
The
Company has revised the risk factors as appropriate to ensure that they provide
sufficient disclosure explaining the risks to investors.
21 Please
relocate the last risk factor in this section to a more prominent
location.
The last
risk factor has been relocated to a more prominent location.
22 Please
add risk factors addressing each of the following, to the extent
material:
•
the potential dilution resulting from the exercise or conversion of outstanding
convertible securities, including the amount issuable under these securities as
of the most recent practicable date;
The
Company considers that any potential dilution as above would not be
material.
•
the risks specific to each of the lines of business in which you
operate;
Although
the business is directed at three main markets, insurance restoration, petroleum
contracting and new construction they all contain the same inherent risks which
are common to the construction and demolition business. To the extent any risk
is more applicable to one part of the business we have so indicated in the
specific risk factor.
•
your outstanding indebtedness, including the total amount outstanding as of the
most recent practicable date, and, in view of the state of the current lending
market, your ability to obtain additional debt financing; and
We have
included an additional risk factor with respect to the overall indebtedness of
the Company.
• your possible quotation on the OTC
Bulletin Board.
We have
added a risk factor with respect to the Company’s possible quotation on the OTC
Bulletin Board.
Dependence
on key executives and management personnel, page 7
23. Please
disclose that you have no key man insurance although the company is dependent
upon key executives and management.
The
Company does have a $5,000,000 key man insurance policy on the Company’s Chief
Executive Officer, Chairman and President. The Company has included the policy
as an exhibit to revised registration statement and have disclosed the same in
this section as well as in the risk factors.
Loans
provided by key executives and employees, page 8
24. Please
disclose the amount of loans provided by executives for each of the past three
years, as well as the aggregate amount currently outstanding.
The
Company has revised its disclosure to include the amount of the loans provided
by the Company’s executives over the past two years. There were no loans made
prior to this two year period. The Company’s disclosure includes the aggregate
amount currently outstanding.
Determination
of Offering Price, page 12
25. It
appears your common stock trades on the pink sheets. Please advise or
revise.
The
registration statement has been revised to include an appropriate description
and table with respect to historical price information.
Selling
Shareholders, page 13
26. Please
disclose and briefly describe the transaction or series of transactions in which
each selling shareholder received its registered shares or provide a cross
reference to this disclosure located elsewhere in the prospectus.
The
registration statement has been revised to include the following language:
“Please see Item 15 “Recent Sales of Unregistered Securities” for a more
detailed description of the transactions whereby the securities of the selling
shareholders were acquired.”
27. The
total amounts listed for the second and third columns, 5,724,160 and 28,755,547,
respectively, do not correspond exactly to the amounts in the respective
columns. Please revise accordingly.
The table
has been revised.
28. For
any selling shareholder that is not a natural person, identify by footnote or
otherwise the natural person or persons having sole or shared voting and
investment control over the securities. See Questions 140.01 and 140.02 under
Section 140 in our July 3, 2008 Compliance & Disclosure Interpretations of
Regulation S-K that are available on the Commission's website at http://www.sec.gov/divisions/corpfinlguidance/regs-kinterp.htm.
The
Company has revised the footnotes to the Selling Shareholder schedule to more
fully identify those stockholders who are not a natural person and the
individual who has investment control over the securities.
29. Where a selling shareholder is
identified as an affiliate of the company, please revise to explain the nature
of the relationship giving rise to the affiliation.
The
footnotes to the table have been revised accordingly.
30. Please
explain what you mean in footnote (9) that Underground Tank Partners has
"common
ownership" with a director.
The
Company has revised its footnotes to the Selling Shareholder schedule to further
explain the Company’s relationship to Underground Tank Partners. In the
Company’s initial filing we referred to “common ownership” with a director. One
of the Company’s director’s, owns 16.67% ownership of Underground Tank Partners.
He is listed as affiliated with the company and thus Underground Tank Partners
has “common ownership” with one of the Company’s directors. The Company has
revised the footnote to further clarify the ownership.
Plan
of Distribution, page 16
31. Your
common stock appears to be a penny stock. Please discuss the disclosure
obligations required by Rules 15g-2 through 15g-6 under the Exchange
Act.
The
following language has been included within the amended registration
statement:
“Penny Stock Rules
Due to
the offering price of our common stock, as well as the fact that we do not
expect to be listed on a national securities exchange registered with the SEC,
our stock may be characterized as “penny stock” under applicable securities
regulations unless we can maintain a minimum net worth of $5 million. If our
stock is characterized as a penny stock, our stock would be subject to
rules adopted by the SEC regulating broker-dealer practices in connection
with transactions in penny stocks. The broker or dealer proposing to effect a
transaction in a penny stock must furnish his customer a document containing
information prescribed by the SEC and obtain from the customer an executed
acknowledgment of receipt of that document. The broker or dealer must also
provide the customer with pricing information regarding the security prior to
the transaction and with the written confirmation of the transaction. The broker
or dealer must also disclose the aggregate amount of any compensation received
or receivable by him in connection with such transaction prior to consummating
the transaction and with the written confirmation of the trade. The broker or
dealer must also send an account statement to each customer for which he has
executed a transaction in a penny stock each month in which such security is
held for the customer’s account. The existence of these rules may have an
effect on the price of our stock, and the willingness of certain brokers to
effect transactions in our stock.”
32. We
note the disclosure in this section regarding Rule 144. Please clearly explain
the eligibility of selling shareholders to rely upon Rule 144, especially in
light of the fact that certain selling shareholders are affiliates of the
company. Please also comply with this comment in the section entitled "Market
for Common Equity and Related Shareholder Matters" on page 38.
The
registration statement has been revised to indicate that no shareholder may rely
on Rule 144 until one (1) year following the anniversary date of the Company’s
initial filing of Form S-1 on July 17, 2009.
33. We
note the disclosure in this section regarding hedging transactions. Please
advise us as to whether the selling shareholder has taken or plans to take any
short position prior to the effectiveness of the registration statement. In
addition, please confirm that you and the selling shareholders are aware of our
position on short sales against the box. See Interpretive Response 239.10 of the
Securities Act Sections Compliance and Disclosure Interpretations, which are
available on our website at http://www.sec.gov/divisions/corpfin/guidance/sasinterp.htm.
The
Company has revised its disclosure under Plan of Distribution that the Company
has not been notified nor has any knowledge of any Selling Shareholder’s intent
to take any short position prior to the effectiveness of the registration
statement. The Company has made the Selling Shareholders aware of the
Commissions position on short sales against the box.
34. We note the disclosure in this
section with respect to engaging broker-dealers. If a selling shareholder enters
into an agreement following the effectiveness of the registration statement to
sell its shares to a broker-dealer as principal and the broker-dealer is acting
as an underwriter, you must file a post-effective amendment to your registration
statement identifying the broker-dealer, providing the required information on
the plan of distribution, revising the appropriate disclosures in the
registration statement, and filing the agreement as an exhibit to the
registration statement. Additionally, please be advised that prior to any
involvement of any broker-dealer in the offering, such broker-dealer must seek
and obtain clearance of the underwriting compensation and arrangements from
FINRA. Please revise the disclosure in this section to delete the reference to
selling to broker-dealers as principals or indicate in the disclosure that the
company will file a post-effective amendment addressing the above
information.
The
Company has revised the Plan of Distribution section to delete reference to
selling to broker dealers as principals.
Description
of Securities, page 18
35. We
note the statement in the first paragraph that the summary is qualified by
reference to your charter documents. You may not qualify information in the
prospectus in this manner unless incorporation by reference or a summary of a
document filed as an exhibit is required. See Rule 411(a) of Regulation C under
the Securities Act. Please revise accordingly.
The
Company has amended the statement to remove the “qualified by reference
language”
Description
of Business. page 19
36. We
note the disclosure throughout the filing regarding your petroleum contracting
specifically relating to government mandates. Please expand your disclosure to
address your plans with respect to this line of business for 2010 and beyond. In
this regard, we note the disclosure that the deadline for the government mandate
is December 31, 2009.
The
Company has expanded its discussion under Description of Business to include the
Company’s plans with respect to the Company’s business for 2010 and
beyond.
37. Please
disclose the information required by Item 101 (h)(4)(v) of Regulation S-K. In
responding to this comment, please identify the suppliers on which you depend
the fact that certain selling shareholders are affiliates of the company. Please
also comply with this comment in the section entitled "Market for Common Equity
and Related Shareholder Matters" on page 38 and
file any agreements with them as exhibits to the registration
statement. In this regard, we note the disclosure on page 10 that you
are "dependent on specific suppliers... "
The
Company has provided the information required by Item 101(h) (4) (v) of
Regulation S-K, identified the suppliers and the fact that certain affiliates
are shareholders of the Company. In addition the Company has incorporated the
information in the section entitled "Market for Common Equity and Related
Shareholder Matters" and filed any agreements with them as exhibits to the
registration statement.
38. Please
disclose the information required by Item 101 (h)(4)(x) of Regulation
S-K.
The
Company has not incurred any costs related to research and development over the
past two years.
39. Please
expand your disclosure to discuss in reasonable detail your plans for geographic
expansion.
The
Company has expanded its disclosure to discuss the Company’s plans for
geographic expansion.
40. Please
discuss your customer arrangements/agreements. In responding to this comment,
please discuss your contracts with governments. In this regard, we note the
disclosure in note 9 to your quarterly financial statements.
The
Company has revised its discussion to include information concerning the
Company’s contract process with government entities.
41. Please
disclose the information required by Item 101 (h)(4)(vi) of Regulation
S-K. In this regard, we note the disclosure in note 12 to the annual
financial statements. In addition, please file your agreements with these
customers as exhibits to the registration statement or explain to us .why you
are not required to do so. Refer to Item 60l(b)(l0) of Regulation
S-K.
The
Company has disclosed in the amended registration statement that information
provided in the Company’s December 31, 2008 and 2009 financial statements
regarding the Company’s dependence on major customers and subcontractors is no
longer valid.
Petroleum
Contracting specifically relating to Government Mandates, page 20
42. We
note the disclosure in the fourth risk factor on page 10 regarding the national
tank reline firm. We also note Exhibit 10.7. Please disclose the material terms
of your arrangement with this company.
The
Company has disclosed the material terms of the arrangement with the national
tank reline firm in the Company’s amended registration statement.
Competition,
page 21
43. Please
revise to discuss for each of your lines of business the methods of competition
in the industry. Refer to Item 101(h)(4)(iv) of Regulation S-K.
The
Company has revised the Competition section accordingly.
Insurance
Restoration, page 21
44. Please
describe in greater detail the "unique" certifications that you hold in the
mold, fire and structural and restoration markets.
The
Company has added a discussion to the amended registration statement regarding
the certifications that the Company holds in relation to the insurance
restoration business.
Marketing,
page 23
45. We
note the disclosure regarding your retention of Mr. Jeb Bush. Please provide to
us support for this disclosure and file any agreements you have with Mr. Bush as
exhibits to the registration statement. Please also disclose the terms of your
arrangements with Mr. Bush.
The
Company has disclosed the terms of the Company’s arrangements with Mr. Jeb Bush
within the amended registration statement and have filed the agreement as
Exhibit 10.14.
46. Please
explain the services performed by Mr. Horne. Please also provide to us support
for this disclosure and file any agreements you have with Mr. Horne as well as
any arrangements with Mr. Home.
The
Company has disclosed the terms of the Company’s arrangements with Mr. Horne
within the amended registration statement and have filed the agreement as
Exhibit 10.15.
Employees,
page 24
47. Please
describe in greater detail the nature of your lease arrangement with the
professional employer organization.
The
registration statement has been amended to disclose the nature of the Company’s
lease agreement with an unrelated professional employer organization in greater
detail and the Company has filed the agreement at Exhibit 10.10 to Form
S-1.
Management's
Discussion and Analysis of Financial Condition and Plan of Operations, page
26
Results
of Operations for the Quarter Ended March 31. 2009 as Compared to the Quarter
Ended
March 31, 2008, page 27
48. You indicate that your increase in
revenues during the first quarter 2009 and during 2008 was a result of an
increase in petroleum contracting and the Company's strategic alliance with a
technology. Further explain the alliance and the nature of technology and
specifically how it has resulted in an increase in sales. Also tell us whether
or not you expect this trend to continue. With regard to your petroleum
contracting, please tell us and disclose the anticipated impact of meeting the
Florida state mandated deadline for replacement or relining. We note your
statement on page 30 that continued growth is partially dependent on additional
states in the United States setting deadlines for compliance. Please quantify
how much the petroleum contracts have impacted your sales and gross profit
during 2009 and whether you expect a significant change in future periods once
the deadline for December 2009 has been met.
The
Company has noted your comments concerning the increase in revenues for the
first quarter 2009 and have revised the language within the amended registration
statement to further explain the alliance and the nature of the technology and
how it has increased the Company’s sales for the six months ended June 30,
2009.
49. You
state that general and administrative costs decreased during the first quarter
of2009 as a result of the Company taking steps to reduce the costs, however, you
do describe the steps taken. Please revise to discuss in detail the steps taken
in your cost cutting initiative and quantify the impact these cost cutting
measure had on operations and will have on future operations.
The
Company has revised its discussion of general and administrative costs within
the amended registration statement to include the detailed steps the Company has
taken to reduce costs as well as quantifying the impact that these steps have on
operations for the six month period ending June 30, 2009 and future
periods.
Results
of Operations for the Year Ended December 31, 2008 as Compared to the Year
Ended
December 31, 2007, page 27
50. Please
clarify that your gross loss increased in 2008 rather than decreased. Further
tell us in detail how the gross loss was impacted by investments made to the
Company's infrastructure by creating systems and controls to comply with
Sarbanes - Oxley. It is unclear how this is a factor that would impact revenue
or cost of sales.
The
Company has corrected the description of the losses between years ended December
31, 2008 and 2007 within the registration statement and have removed the
discussion of the impact of the Company’s infrastructure as it relate to
creating systems and controls to comply with Sarbanes-Oxley. The Company has
added the revised discussion in the amended registration statement.
51. We
note you recorded bad debt expense during 2008 of $23,886, Considering the
material nature of your contracts receivable balance, please revise MD&A to
discuss any collectability or billing problems with any major customers or
classes of customers or any significant changes in credit terms, collection
efforts credit utilization and/or delinquency policies.
The
Company has revised the MD & A within the amended registration statement to
include a discussion on the Company’s billing and collecting procedures and have
included the Company’s procedures in the event of non-payment by
customers.
Liquidity
and Capital Resources, page 28
52. Please
revise your liquidity section to explain liquidity issues arising from all
components of cash flow: operating, investing, and financing as included in your
consolidated statement of cash flows. In this regard, during 2008, you had
significant increases in your contracts receivable, costs and estimated earnings
in excess of billings on uncompleted contracts and accounts payable balances
with further increases in contracts receivables and accounts payables in the
first quarter of 2009 but a significant decrease in costs and estimated earnings
in excess of billings on uncompleted contracts during the first quarter 2009.
Given the significant impact these balances have on your liquidity, please
revise your MD&A and liquidity section to explain the reasons for these
increases and any variances in the corresponding turnover ratios. In this
regard, we note your contracts receivable balance increased $318,763 during 2008
and another $253,119 during the first quarter of 2009. Further explain why your
costs and estimated earnings in excess of billings on uncompleted contracts
decrease during the first quarter 2009 was a result of shorter duration
contracts.
The
Company has revised its discussion in the liquidity section within the amended
registration statement to explain the different components of cash flow. The
Company has explained the reasons for these increases. The Company has also
revised its discussion of the significant decrease in costs and estimated
earnings in excess of billings on uncompleted contracts.
53. We
note your substantial negative operating cash flows during the past year and the
most recent interim period and that these deficits have been funded by advances
from shareholders. Considering your deficit, your continual net losses and going
concern, we believe your liquidity section should be revised to address the
following issues in order to enhance an investor's understanding of your ability
to meet your cash requirements over the next twelve months:
•
Material cash requirements, including the funds needed to operate, complete
projects and implement business plans and fund short term and long term cash
requirements;
•
Disclose short-term liquidity and short-term capital resources that cover cash
needs up to 12 months into the future. These cash needs and the sources of funds
to meet such needs relate to the day-to-day operating expenses and material
commitments coming due during that l2-month period. Your disclosure should
discuss how you plan to fund your operating cash flows, and service your debt
coming due in the next 12 months, specifically your term loan due in December
2009;
•
Discuss your long-term liquidity and long-term capital resources such as
material capital expenditures, payments due on long-term obligations and other
demands or commitments, including any off-balance sheet items, to be incurred
beyond the next 12 months, as well as the proposed 80urces of funding required
to satisfy such obligations; and
•
Where a material deficiency in short or long-term liquidity has been identified,
you should disclose the deficiency, as well as disclosing either your proposed
remedy, that that you have not decided on a remedy, or that you are currently
unable to address the deficiency.
The
Company has revised its discussion in the Liquidity and Capital Resources
section within the amended registration statement to include a discussion on the
Company’s material cash requirements, both short and long term, needed to
complete the Company’s projects and implement the Company’s business plan. The
Company has included in the discussion managements plan to meet short term debt
obligations, such as the Company’s debt coming due in December 31, 2009 as well
as other obligations coming due in the next 12 months. The Company has also
included a discussion on how we propose to remedy the shortfalls.
Refer
to Section 501.03 of the Financial Reporting Codification.
54. We
note your customer concentration and subcontractor concentration disclosure on
pages F-23. Please provide a discussion within the liquidity section, in future
filings, to discuss the effects of your customer concentrations and
subcontractor concentrations on your liquidity and operations, specifically
whether the loss of all or portion of the sales volume from a significant
customer would have an adverse effect to liquidity or operations. Refer to
Financial Reporting Codification 501.03.a.
The
Company has revised its discussion within the liquidity section within the
amended registration statement to address the note to the Company’s financial
statements for the year ended December 31, 2008 and 2009 relating to the
Company’s customer and subcontractor concentration.
Quantitative
and Qualitative Disclosures about Market Risk, page 35
55. Considering
the amount of debt you have outstanding that is at a variable interest rate a
discussion of interest rate risk management strategies appears appropriate.
Please revise your MD&A, in future filings, pursuant to Item 305(b) of
Regulation S-K, to discuss your interest rate risk exposure, your risk
management strategies, or if you don't manage this risk, a statement disclosing
that fact.
The
Company has revised the registration statement to include the effect of variable
interest rate risks on the Company’s financial position.
Security
Ownership of Certain Beneficial Owners and Management, page 36
56. The
percentage ownership listed in the table for each person does not appear to be
correct, other than with respect to Mr. Feldmesser. Please review the
percentages and revise accordingly. Refer to Item 403 of Regulation
S-K.
The table
has been revised accordingly.
Certain
Relationships and Related Transactions, page 37
57. We note the various transactions
discussed in this section. Please file all documents relating to these
transactions as exhibits to the registration statement.
The
Company has filed as Exhibits to the amended registration statement all
documents relating to the transactions described in the Certain Relationships
and Related Transactions section.
Employment
Agreements, page 37
58. We
note the disclosure in the last paragraph. Please advise us as to whether any of
the registered shares on behalf of Mr. Seddon consist of the shares subject to
the promissory note. If not, please clearly disclose this in the prospectus. If
so, please provide us with a copy of the promissory note.
The
Company has revised the employment agreement discussion within the registration
statement to include reference to shares subject to a promissory note to a
former officer and employee. The Company has also revised the footnotes to the
Selling Shareholder table to reflect the same information.
Market
for Common Equity and Related Shareholder Matters, page 38
59. Please
combine the disclosure in this section with the disclosure in the section
entitled "Market for Common Equity and Related Shareholder Matters" on page
25.
The
Company has combined the disclosure under the “Market for Common Equity and
Related Shareholder Matters” with disclosure under “Approximate Number of Common
Stockholders” within the amended registration statement.
Approximate
Number of Common Stock Holders, page 38
60. We
note the disclosure in the fifth paragraph. Please disclose the specific date
when Rule 144 will be available to shareholders.
The
registration statement has been amended to include the following
language:
“The
Company filed a Form S-1 with the SEC on July 17, 2009. Accordingly, security
holders of the Company may utilize Rule 144, assuming that the Company is
current in its reporting requirements pursuant to the Exchange Act of 1934, as
amended, on July 17, 2010. “
Board
of Directors, page 39
61. Please
disclose the information required by Item 407(a) of Regulation S-K.
The
Company has disclosed the information required by Item 4079(a) of Regulation S-K
within the amended registration statement.
Directors'
Compensation, page 39
62. Please
revise to provide the information in the tabular format required by Item 402(r)
of Regulation S-K.
The
Company has provided the information in the tabular format
required by Item 402(r) of Regulation S-K.
63. Please
clarify that directors who are also employees of the company receive this
compensation.
The
Company has clarified in the amended registration statement that directors who
are also employees receive the same compensation as outside
directors.
Executive
Compensation, page 39
64. It
appears that Mr. Seddon's employment agreement provides for the award of a bonus
and securities. Please advise us as to why these awards are not reflected in the
table.
Mr.
Seddon’s award of a bonus and securities is not reflected on the table as the
award was not effected. Mr. Seddon is due a bonus based on profitability. The
Company has not yet reached the threshold to award Mr. Seddon a bonus. However,
Mr. Seddon was awarded 500,000 warrants to purchase the Company’s common stock
at $0.63 a share in June of 2009. The table in the amended registration
statement has been revised to include this award.
65. It
appears that Mr. Seddon receives securities as compensation at a discount to the
market price. Please advise us as to why the discount is not reflected in the
table.
Mr.
Seddon has not received any securities at a discount to the market price as
compensation consequently there are none listed in the Executive Compensation
table.
66. It
appears that Mr. Seddon receives certain perquisites. Please advise us as to the
annual amount of each perquisite.
The
Company has added the following paragraph:
“In
accordance with Mr. Seddon’s employment agreement, the company provided a
company vehicle, reimbursed certain home office expenses and paid health
insurance premiums on his behalf. For the years ended December 31, 2006, 2007
and 2008, the Company paid $15,049, $14,907 and $16,803, respectively for these
expenses. The value of the provided vehicle by the Company was based on cost of
that vehicle to the Company. Mr. Seddon was not paid a bonus or other
compensation.”
The table has been updated to reflect the annual amount of each
perquisites.
Warrants
and Options, page 40
67. We
note the disclosure that there are options outstanding to purchase 3,548,054
shares of common stock. We also note the disclosure under "Common Stock Purchase
Warrants" that there are warrants outstanding to purchase 3,548,054 shares of
common stock. Please clarify whether you are referring to "options" and
"warrants" interchangeably. If so, please revise throughout the filing to
clarify.
The
Company has revised the reference to warrants and options to only include
reference to warrants throughout the amended registration
statement.
Financial
Statements
Note
2 - Restatement of Previously Issued Financial Statements, page
F-12
68. We
note that you have changed your accounting policy for recognizing revenue from
the completed contract method to the percentage-of-completion method. Please
explain why you used the completed contract method and how you considered
paragraphs 23 and 31 of SOP 81-1. Be advised that the percentage-of completion
method is the preferable method. See paragraph 15 of ARB 45.
Historically,
the Company has completed a substantial amount of construction contracts with
insurance companies where damage resulted from a catastrophic event. The ability
of the Company to make reasonably dependable estimates was difficult because
work had to commence on a contract or group of contracts in order to determine
the extent of the damage. As the work progressed, additional costs were
discovered which caused difficulty in providing reasonably dependable estimates
at the beginning of the contract work.
The
Company determined that the financial position and results of operations would
not vary materially by using the completed-contract method on these types of
contracts. In many cases, these insurance funded contracts were of
relatively short-term nature and were completed within one accounting cycle
and would not produce a material difference from the preferred
percentage-of-completion method.
The
nature of the Company’s business has evolved to contracts awarded based on
submitted bids. Contract values were more easily determined with dependable
information as to completion dates, contract revenues and costs. The Company
desires to simplify it’s accounting methods by using the preferred method of
percentage-of-completion on all contracts rather than two different
methods.
Note
12 - Major Customers, page F-23
69. Supplementally
provide us with a copy of the customer contract that comprises the
largest portion of your revenues at June 30, 2009.
We have
attached as Exhibit 10.16 a copy of a contract that comprises the largest
portion of the Company’s revenues at June 30, 2009.
Note
14 - Related Party Transactions, page F-23
70. We
note your transaction during 2008 related to a performance bond where the
Company is currently paying a stockholder interest, monthly, at the annual rate
of 7% for providing collateral. You state that no asset or liability is shown on
the balance sheet. Please revise to disclose more details of this transaction
and how you determined that it is appropriate not to record an asset or
liability related to this performance bond. Cite the authoritative guidance that
supports your accounting.
The
Company has revised the Company’s discussion to disclose more details of this
transaction within the amended registration statement.
At the
time the Company was awarded the contract, there were no arrangements in
place to use a third party surety. The founding shareholders agreed to use
a personal certificate of deposits as collateral. In order to change
the title of the certificate of deposit to the Company, a substantial
penalty would have been inccurred. The Company elected to pay
the shareholder a fee in the form of interest to use the certificate of
deposit as collateral for the contract . The founding shareholder was paid
$1,429 per month for the use of the collateral. The Company now uses a third
party surety to bond its contracts when needed.
Item
14. Indemnification of Directors and Officers, page 42
71. Please
discuss the material terms of your indemnification agreements.
The
Company has revised the amended registration statement to fully disclose the
material terms of the Company’s indemnification agreements.
Item
15. Recent Sales of Unregistered Securities, page 43
72. Please
disclose the information required by Item 701 of Regulation S-K with respect to
the options and warrants issued over the past three years.
The
Company has disclosed the information required by Item 701 of Regulation S-K
with respect to the options and warrants issued over the past three
years.
Item
16. Exhibits, page 46
73. We
note the promissory notes filed as Exhibit 10.5 and 10.6. Please file all
documents relating to your other indebtedness as exhibits to the registration
statement or advise us as to why you are not required to do so.
With the
amended registration statement, the Company has filed all documents relating to
its indebtedness.
Item
17. Undertakings, page 46
74. Please
revise the undertakings to provide them in the exact form required by Item 512
of Regulation S-K.
We have
revised the undertakings accordingly.
75. We note the undertaking provided in
paragraph (a)(4). This undertaking is not applicable to the offering as you are
not Rule 4308 eligible. Instead, please provide the undertaking required by Item
512(a)(5)(ii) of Regulation S-K.
We have
removed the undertaking
provided in paragraph (a)(4)and provided the undertaking required by
Item 512(a)(5)(ii) of Regulation S-K.
76. The
undertaking in paragraph (b) does not apply to the offering. Please
revise.
The
undertaking in paragraph (b) has been removed.
Signatures,
page 48
77. Please
indicate which person(s) has signed the registration statement in the capacity
of principle executive officer and controller or principle accounting officer.
See Instruction 1 to Signatures on Form S-l.
We
have amended the signatures to indicate which person has signed the registration
statement in the capacity of principle executive officer and controller or
principle accounting officer.
Exhibit
5.1
78. We
note the statement that counsel are members of the bar of the State of New York
and are not licensed or admitted to practice law in any other jurisdiction.
Counsel may not limit its opinion in this manner, as the company is incorporated
in the State of Florida. Please have counsel revise its opinion
accordingly.
The
opinion contains the following language:
“We are
members of the bar of the State of Texas and are not licensed or admitted
to practice law in any other jurisdiction. Accordingly, we express no opinion
with respect to the laws of any jurisdiction other than the laws of the State of
Texas, the corporate laws of the State of Florida and the federal laws of the
United States.”
The
initial sentence is not a limitation, merely a statement of fact as the firm is
not licensed in any jurisdiction, other than New York. The second
sentence is the limitation, however, the language specifically includes the
corporate laws of the State of Florida.
79. Please
have counsel confirm to us that it concurs with our understanding that its
reference to the corporate laws of the State of Florida includes the statutory
provisions and all applicable provisions of the Florida Constitution and any
reported judicial decisions interpreting these laws. Please have counsel file
this confirmation as correspondence on EDGAR.
The
opinion has been revised to include the following language:
“Accordingly,
we express no opinion with respect to the laws of any jurisdiction other than
the laws of the State of New York, the corporate laws of the State of Florida
(including the statutory provisions and all applicable provisions of the Florida
Constitution and any reported judicial decisions interpreting these laws) and
the federal laws of the United States.”
Per our conversation with your staff, please note that we have
changed legal representation.
We would
very much appreciate your prompt review of Amendment No. 1 and our responses to
your comment letter. If you have any comment or questions about the
foregoing, please contact Rodger Rees, our CFO, at 561.333.3600 x
403. I thank you for your attention to this matter.
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With kind
regards,
/s/
Ryan Seddon, Pres.
SSGI, Inc.
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