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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
Mail Stop 7010
September 28, 2006
Via U.S. Mail
Mr. Jeffrey C. Mack
President and Chief Executive Officer
Wireless Ronin Technologies, Inc.
14700 Martin Drive
Eden Prairie, Minnesota 55344
Re: Wireless Ronin Technologies, Inc.
Registration Statement on Form SB-2
Filed August 29, 2006
File No. 333-136972
Dear Mr. Mack:
We have reviewed your 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
information so we may better understand your disclosure. After
reviewing this information, we may 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.
Form SB-2
General
1. To minimize the likelihood that we will reissue comments,
please
make corresponding changes where applicable throughout your
document(s).
2. Prior to printing and distribution of the preliminary
prospectus,
please provide us with copies of all artwork and any graphics you
wish to include in the prospectus. Also provide accompanying
captions, if any. We may have comments after reviewing these
materials.
3. Please file all omitted exhibits and all material contracts,
including the Agreement with Marshall Special Assets Group, Inc.
Note that we will need additional time to review the exhibits once
they are filed. We may have further comments.
4. Please avoid duplicative disclosure throughout the filing. In
this regard, we note your disclosure under "Business Strategy" on
pages 1 and 30. Please revise.
Cover Page
5. Please revise to condense into one statement the two statements
referring to the underwriter`s option to purchase up to 675,000
additional shares.
Prospectus Summary
6. Provide balanced disclosure identifying the positive as well as
the negative aspects of your business or inhibit disclosure about
your strategic plans and competitive advantages.
7. To the extent practicable, simplify your discussion throughout
this section, avoiding terms with which the reader may not be
familiar or which may require lengthy definition. In this regard,
it
is not clear exactly what your business does. Please revise
accordingly.
8. We note that you have included a list of customers for your
products. Please disclose the basis for including the customers
that
you have selected. For example, you should indicate, if true,
that
they are your largest customers based on revenues. In this
regard,
please note that the inclusion of customers based on their name
recognition is not appropriate.
Risk Factors, page 6
9. Avoid statements or clauses that may have the effect of
mitigating
the risks you present. In this regard, we note that the
subheadings
and the text of your risk factors include clauses, such as "even
if,"
"while we," "if we are unable," "we cannot be sure," "we cannot
predict," "we cannot guarantee," "we cannot predict," and "we
cannot
assure."
10. Please revise the following subheadings to clearly describe
the
risks associated with the facts you describe. Also note that it
is
not sufficient to merely state that your business, operations, or
revenues may be adversely affected. Rather, discuss what the
adverse
effect may be:
* "While we anticipate that, based on our current expense levels,
the
net proceeds from this offering will be adequate to fund..." on
page
7;
* "We depend on third party manufacturers, suppliers and service
providers" on page 7;
* "Reductions in hardware costs could adversely affect our
revenues"
on page 8; and
* "If we are unable to successfully implement security measures
protecting our..." page 10.
11. We note your disclosure on page 44 indicating that your
articles
of incorporation provide that your "directors shall not be
personally
liable for monetary damages to" you or your shareholders for a
breach
of fiduciary duty. Please discuss how such limitation on the
directors` liability may impact your directors` determinations
with
respect to your business and operations.
12. Please discuss how a default on your debt obligations might
impact your financial condition and business. We note that you
recently defaulted on a debenture that was issued to Spirit Lake
Tribe.
Our future success depends on key personnel and our ability to
attract and retain additional personnel, page 8
13. Please identify those persons you refer to as "key personnel."
Use of Proceeds, page 16
14. Please comply with Item 504 of Regulation S-B and specify how
the
proceeds of the debt being paid with the proceeds of this offering
were used. Also disclose how you intend to use any offering
proceeds
remaining after the payment of your debt. It is not sufficient
to
state to that the proceeds were used or will be used for a general
purpose.
15. Please disclose the reasons for conducting this offering, as
required by Item 504 of Regulation S-B. In this regard, we note
that
you have allocated a portion of the proceeds for the payment of
outstanding debt, but you do not have any specific plans for the
remaining proceeds.
Capitalization, page 17
16. In the capitalization table you present total common stock in
the
June 30, 2006 As Adjusted column as $8,743. The item discussed in
the narrative as being presented within the As Adjusted column is
the
issuance of 8,333 shares of common stock in lieu of cash interest
payable to the Spirit Lake Tribe. Given the transaction described,
it
is unclear how the amount of common stock issued increased from
$8,460 in the June 30, 2006 Actual column, to $8,743 in the As
Adjusted column. Please reconcile this difference within your
disclosures and include any corresponding discussion.
17. In addition, we note that the June 30, 2006 As Adjusted column
reflects the issuance of 12% convertible bridge notes. Further,
we
note that you increased the current portion of the note payable
balance as of June 30, 2006 by $314,466 to reflect this
transaction.
Tell us how you would recalculate this adjustment amount utilizing
the information you have provided in the narrative discussion of
the
pro forma adjustments. Please revise your discussion to provide
sufficient detail of the components of this adjustment amount.
Management`s Discussion and Analysis of Financial Condition...,
page
21
Critical Accounting Policies and Estimates, page 21
Accounting for Stock-Based Compensation, page 23
18. In the final paragraph of your discussion related to stock-
based
compensation, the last sentence appears to be incomplete. Please
revise the disclosure to complete the sentence.
Results of Operations, page 25
19. We note your discussion provides limited insight into the
underlying reasons for variances and guidance on whether or not
the
historical results of operations and cash flows are indicative of
expected results. The objective should be to provide information
about the quality and potential variability of earnings and cash
flow, so readers can ascertain the likelihood that past
performance
is indicative of future performance. The discussion should also
focus on any known trends, events or uncertainties that have had
or
that are reasonably expected to have a material impact on your
liquidity or income from continuing operations. Revise your
results
of operations discussion where appropriate. Please refer to Item
303
of Regulation S-B and FRC Sections 501.12 and 501.13 for further
guidance.
Liquidity, page 26
20. Please disclose whether you have enough funds to meet your
cash
requirements for the next twelve months.
Cost of Sales, page 27
21. Please quantify each of the factors that contributed to the
decrease in the cost of sales.
22. You state that "...the cost of software incurred in the
current
period is presented in operating expenses." Please disclose why
you
believe it is appropriate to include the costs of such items
within
operating expenses as compared to costs of sales. As part of your
response, please address the requirements of Rule 5-03(b)(2) of
Regulation S-X which explains that a company should separately
state
the costs associated with the revenues presented on a
disaggregated
basis.
Operating Expenses, page 27
23. You explain that as a result of moving into new space you
incurred higher costs for depreciation. Please tell us the amount
of
depreciation expense recorded in each of the line items for
operating
expenses and cost of sales for each period.
Liquidity and Capital Resources, page 27
24. We note your auditor`s report includes an explanatory
paragraph
indicating there is substantial doubt about your ability to
continue
as a going concern. Please disclose specifically within MD&A that
there is substantial doubt about your ability to continue as a
going
concern. Discuss the pertinent conditions and events that give
rise
to this assessment, the possible effects of such conditions and
events, and management`s plans to address such conditions and
events.
Please refer to Section 607.02 of the Financial Reporting
Codification for additional guidance.
Business, page 30
25. Please provide the disclosure required by Item 101(a) of
Regulation S-B.
26. We note the statement on page 7 that you "rely on third
parties
to manufacture and supply parts and components for [y]our products
and provide order fulfillment, installation, repair services and
technical and customer support." Please identify the names of
your
principal suppliers, as required by Item 101(b)(5) of Regulation
S-B.
Also file as exhibit the contracts with such suppliers.
Industry Background, page 31
27. Please identify any sources you reference to support
assertions
about your business or operations. Also confirm that such sources
are publicly available for a de minimis amount.
Our Customers, page 34
28. Please disclose whether any of the identified customers
account
for more than 10 percent of your revenues and, if so, specify the
percentage of revenues such customer accounts for.
Agreement with Marshall Special Assets Group, Inc., page 39
29. We note that you entered into this agreement in May 2004.
Please
disclose whether you have received any payments pursuant to this
agreement since October 2004.
Intellectual Property, page 40
30. Please disclose whether you have entered into any licensing
agreements and, if so, describe the material terms of such
agreements.
Competition, page 40
31. If practicable, please disclose your competitive position
among
the identified competitors.
Management, page 42
32. Please disclose Mr. Thomas J. Moudry`s place of employment
between July 2003 and June 2005.
Management, page 42
Executive Compensation, page 45
33. Within the table of Option Grants in Last Fiscal Year, you
present a warrant granted to Mr. Ebbert to purchase 27,778 common
shares at an exercise price of $0.09 per share. Please tell us if
you recognized any compensation expense in conjunction with the
granting of this warrant. If not, please tell us the reasons why,
including any applicable accounting literature you used to support
your position.
34. We note that you awarded the named executive officers warrants
that are not included in the Summary Compensation Table. Please
discuss the reasons for awarding the warrants. If the warrants
were
awarded in compensation for services provided to you, tell us why
the
warrants were not included in the compensation table.
Certain Relationships and Related Party Transactions, page 49
35. Please disclose whether the factoring agreement entered into
with
Barry W. Butzow and Stephen E. Jacobs was on terms no less
favorable
than could have been obtained from an unaffiliated third party.
Description of Capital Stock, page 57
Warrants, page 59
36. You explain that your warrants are currently exercisable at
prices ranging from $0.09 to $56.25. We are unable to locate a
discussion of warrants issued with an exercise price of $56.25.
This
price range is also inconsistent with the disclosures provided in
Notes M and N to your financial statements. Please revise the
range
of exercise prices to the extent necessary, or include a
discussion
of the warrants issued with an exercise price of $56.25, and
correct
the tables presented in Notes M and N of the financial statements.
Underwriting, page 63
37. Please disclose the conditions that must be satisfied to
trigger
the underwriter`s obligation to purchase the securities.
38. Please explain the meaning of the term "non-accountable
expense."
Financial Statements, page F-1
Statements of Cash Flows, page F-9
39. We note that you present a line item within the reconciliation
of
net loss to net cash used in operating activities titled "Issuance
of
Warrants for Short-Term Borrowings - Related Parties." Please
tell
us the nature of the transactions that are included within this
line
item, and why you believe they are appropriately presented as a
reconciling item in the statements of cash flows.,
General
40. We note you raised capital through the issuance of convertible
notes with shares of common stock and warrants to purchase common
stock. We further note the shares of common stock and warrants
carry registration rights. SFAS 133 and EITF 00-19 contain
guidance
regarding the classification and measurement of warrants as well
as
instruments with embedded and freestanding conversion features.
Please submit the analyses that you performed, considering this
guidance, in determining the appropriate accounting for the
warrants
you have issued and any embedded derivatives. If you require
further
clarification, you may refer to Section II.B of Current Accounting
and Disclosure Issues, located on our website at the following
address:
http://www.sec.gov/divisions/corpfin/acctdis120105.pdf
Note A - Summary of Significant Accounting Policies, page F-11
2. Cash and Cash Equivalents, page F-12
41. You explain that you classify deposits and other liquid
investments with original maturities of six months or less as cash
equivalents. The guidance provided in paragraph 8 of SFAS 95
explains that generally, only investments with original maturities
of
three months or less qualify as cash equivalents. Please tell us
why
you believe your investments with original maturities of greater
than
three months qualify as cash equivalents.
3. Accounts Receivable, page F-12
42. We note from your disclosure on page 51 that you entered into
a
factoring agreement whereby you agreed to assign and sell certain
receivables to related parties. Please expand your policy
discussion
to provide the applicable disclosures required by SFAS 140. In
addition, within the discussion on page 51, refer the reader to
where
they may find more information regarding the accounting treatment
applied to the receivable sales.
Note B - Concentration of Credit Risk, page F-18
43. We note that you have combined the sales of your major
customers
and reported total percentages of sales amounts for the years
ended
December 31, 2005 and 2004 and the interim periods ended June 30,
2005 and 2006. Please comply with paragraph 39 of SFAS 131 and
disclose the percentage of sales from each major customer.
Note C - Inventories, page F-18
44. We note your inventory balance as of December 31, 2004
includes
costs for software licenses. Please tell us and disclose the
nature
of the costs included within software licenses, how those licenses
were used by you, and how you obtained them.
Note E - Other Assets, page F-19
45. We note your discussion of the items included within deferred
financing costs. However, we are unable to locate a discussion
related to the warrant to purchase 16,667 shares issued as
consideration for Mr. Butzow`s personal guarantee of the business
loan with Signature Bank, as discussed on page 50. Please revise
the
disclosure to include all material items within deferred financing
costs, or tell us why the costs related to the warrant issued is
not
included within deferred financing costs.
Note F - Bank Lines of Credit and Notes Payable, page F-20
Short-Term Note Payable - Shareholder, page F-20
46. You explain that as a result of the extension of the note
payable, the terms of conversion were adjusted, and you will
record
the costs of the induced conversion when the debt is converted.
As
discussed in the remainder of the document, we note your intention
to
record the costs of other induced debt conversions when the debt
is
converted.
Paragraph 4 of SFAS 84 explains that the fair value of the
consideration given in the induced conversion shall be recognized
as
of the date the inducement offer is accepted by the convertible
debt
holder, which is normally the date the debt is converted, or when
the
parties enter into a binding agreement to do so.
As the offer of induced conversion has been accepted by the debt
holders, please tell us why you have determined deferring
recognition
of these costs is appropriate. Also tell us how you intend to
record
the debt inducement costs in your financial statements.
Bridge Notes Payable, page F-21
47. We note you issued bridge notes in March, July and August of
2006
and recorded beneficial conversion features in conjunction with
the
issuances of these notes. Please provide us your calculations of
the
beneficial conversion feature amounts at the date of issuance of
the
notes, along with any necessary discussion to make the
calculations
understandable. In addition, please clarify within your
disclosures
why you will record additional amounts related to the beneficial
conversion features if and when your initial public offering is
completed.
Note G - Short Term Notes Payable - Related Parties, page F-21
48. We note your disclosure in which you explain the related
parties
were issued 33,332 shares of common stock valued at $7.20 per
share
as consideration for entering into these agreements. Please
disclose
how you determined the fair value of the shares issued.
49. We also note from pages F-24 and F-28 that as consideration
for
entering into the bridge notes, related parties were issued shares
of
common stock valued at $1.80 per share. Please disclose how the
fair
value of these shares was determined, and why the value is
significantly below the shares issued as discussed above.
50. We also note that these agreements matured in March 2006, were
extended through July 2006, and in August 2006 were subsequently
converted into bridge notes. Please tell us whether the extension
of
the notes and the subsequent conversion to bridge notes was
considered a modification of the terms of the notes, or as an
exchange of debt instruments. Please provide us the analysis you
performed under the guidance in EITF 96-19 for all notes whose
terms
were modified during the periods presented.
Short Term Borrowings - Related Parties, page F-22
51. You explain that these borrowings are secured by specific
accounts receivable balances, and the borrowings are due when
those
accounts receivable balances are paid. This transaction appears
to
be the same as that discussed on page 51, as the number of shares
underlying the warrants issued to the counterparty is the same.
However, the discussions of the transactions are different. The
discussion on page 51 explains that the receivables are sold
pursuant
to a factoring agreement, whereas here the receivables are only
securing borrowings made by the company. Please revise the
applicable discussions so they are consistent. In addition,
revise
the disclosure to provide the amount of the borrowings secured by
the
accounts receivable.
Note H - Deferred Revenue, page F-23
52. You explain that during 2004 you were required to refund the
customer for unsold units; however, in 2006 you recognized the
remaining deferred revenue as a result of the expiration of the
agreement. It is unclear why you would recognize the remainder of
the
revenue if you were required to refund the customer for unsold
units
in a prior year. Please revise your disclosure to clarify these
transactions.
Note K - Long term Notes Payable - Related Parties, page F-27
Convertible Debenture Payable, page F-27
53. As you state that you were "in violation with certain
covenants,
but [have] received a waiver for these violations through
September
30, 2006", expand your disclosure to explain the specific
covenants
you were in violation of, and the extent to which you expect to be
compliant with such covenants in the future.
Note R - Subsequent Events, page F-35
54. We note that in conjunction with the 12% convertible notes,
you
sold warrants to purchase 594,806 shares of common stock. Based
on
the assumptions presented in the disclosure, please revise your
disclosure to also provide the fair value of the warrants issued.
Other Expenses of Issuance and Distribution, page II-1
55. Please provide estimates for all unknown amounts.
* * * * *
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 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 urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities Act
of
1933 and that they have provided all information investors require
for an informed investment decision. Since the company and its
management are in possession of all facts relating to a company`s
disclosure, they are responsible for the accuracy and adequacy of
the
disclosures they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert staff comments and the declaration
of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
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.
You may contact Mark Wojciechowski at (202) 551-3759 or
Jenifer
Gallagher, Accounting Branch Chief, at (202) 551-3706 if you have
questions regarding comments on the financial statements and
related
matters. Please contact Carmen Moncada-Terry at (202) 551-3687
or,
in her absence, the undersigned, at (202) 551-3785 with any other
questions.
Sincerely,
Tangela Richter
Branch Chief
cc: J. Gallagher
J. Wojciechowski
T. Richter
C. Moncada-Terry
VIA FACSIMILE
Avron L. Gordon
Briggs and Morgan, P.A.
612-977-8650
Mr. Jeffrey C. Mack
Wireless Ronin Technologies, Inc.
September 28, 2006
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