Subject: File No. S7-19-04
From: Jim Durward

June 7, 2004

I have followed this comment thread for some time and I have the following comments:

General Re: David N. Feldman, Managing Partner
Feldman Weinstein LLP, June 3, 2004 comments.

Re: You could provide a 4-6 item list of these steps and suggest that a showing of any two or three of them would be sufficient for exemption. This list could include things like entering into a lease or purchase of real estate, employing management and/or Board members with specific experience in the intended business, conducting research and development activities, engaging in market research, purchasing or leasing equipment, etc. This exception could exempt absolute pure startups, which may be for the best in any event.

I support the writer with the exception of the last sentence which is a judgment call. Who is to say what is for the best in any event? My understanding is that the SECs mandate is based on full, plain, and true disclosure, not on the judgment of what represents good or bad business potential. Unless the SEC is willing to accept investor liability for causing a company to act in a certain manner, the SEC should not be involved in determining what represents a good investment.

Re: My second concern with the no business plan definition is that some have attempted to put a stakeholder small business in a public entity to avoid meeting the definition of blank check company, or as I am suggesting, public shell. There are several ways to deal with this. First, I suggest you consider public shell status if the only operating business is one that traditionally has virtually no likelihood of growing beyond its current status, such as a barber shop or small consulting firm.

While the comment appears well intentioned, once again business judgments are being made. McDonalds started as a single burger shop. Apple started in a garage. Both of these businesses had no initial applicable management experience. There are nationwide haircutting franchise operations that started as single shops and consulting firms also have the potential of growing to international scale. Just because a company is small now does not mean it will always be small and to disallow the use of publicly-traded shares to grow the business simply goes against the whole idea of public companies. The idea here is to restrict the issuance of freely tradable shares in the absence of full disclosure and we should not forget that.

RE: Second, you should add the right for the Commission to take action against any promoter or group of related or affiliated parties who persistently puts small businesses into public companies and then effects reverse mergers immediately after which the small business is removed from the public company.

It appears the writer is no longer talking about Forms 8 but making a general comment. What happens in the case where a better opportunity comes along? As a businessman, I know that when a business is started up, the future is always uncertain and flexibility and the ability to act quickly are very important. Should the subject company be forced, by the SEC, to sit back and let opportunities pass to the detriment of the companys shareholders? As a venture capitalist and SB2 filer, I know that a common disclosed risk factor is that most US businesses fail within 5 years. What the writer appears to be suggesting is that if a business fails within a short time frame, and the venture capitalist who funded its startup allows it to merge with another company, that same venture capitalist should be subject to an SEC prosecution. I cannot agree with this and I dont think the SEC should either.

Recommended action: If Forms S-8/8-K are to be used, the issuer must have a minimum revenue base of 100,000.

For all other companies require the filing of a registration statement to provide full disclosure to potential investors. Also require compliance with Mr. Feldmans suggestion regarding a required items list that would demonstrate that a business is bona-fide. Then let the investor decide with their own minds what they will or wont do.

Again, the idea here is to restrict the issuance of freely tradable shares in the absence of full disclosure and we should not forget that.