Ameer Ahmad, Esq.

Tel 312.456.8400

Fax 312.456.8435

ahmada@gtlaw.com

 

 

Daniel F. Duchovny, Special Counsel

Office of Mergers and Acquisitions

United States Securities and Exchange Commission

Washington, DC  20549

 

Dear Mr. Duchovny:

 

SCG Financial Acquisition Corp. (the “Company” or “SCG”) has today filed with the Securities and Exchange Commission (the “Commission”) an amendment (“Amendment No. 5”) to its Schedule TO (File No. 005-86187), an amended and restated Offer to Purchase, dated March 28, 2013 (as so amended, the “Offer to Purchase”), and related tender offer documents. On behalf of the Company, we hereby respond to the comments of the staff (the “Staff”) of the Commission contained in its letter dated March 22, 2013. For ease of reference, the text of each of the Staff’s comments is included in bold-face type below, followed by the Company’s response. Capitalized terms that are not defined herein have the meanings assigned to them in the Offer to Purchase. Except as otherwise provided, page references included in the body of the Company’s responses are to the Offer to Purchase.

 

 

1.           Please file Exhibit (a)(1)(I) with your next amendment.

 

RESPONSE:

 

The Company supplementally advises the Staff that Exhibit (a)(1)(I) was filed with Amendment No. 2 to the Schedule TO; the list of exhibits in Amendment No. 5 has been revised to indicate that this exhibit (as well as other applicable exhibits) were previously filed.

 

 

 

 

RESPONSE:

 

Based on our telephonic discussions with the Staff, the Company understands that it is the Staff’s position that the Equity Commitment Letter constitutes an agreement prohibited by Rule 14e-5 of the Exchange Act.  The Company advises the Staff that it has confirmed that all of the shares purchased pursuant to the Equity Commitment Letter were purchased from four stockholders, each of which is an “accredited investor” as defined in Rule 501 promulgated under the Securities Act, in each case at a purchase price of $10.00 per share, the same as the price at which the Company will purchase shares tendered in the Offer. Such purchase price is greater than the price at which SCG Common Shares are currently trading (to date in March 2013, the closing sales price has ranged from $9.92 to $9.98; on March 27 the closing sales price was $9.98). Accordingly, if any of the stockholders who sold shares to DOOH now desire to hold SCG Common Shares in order to participate in the proposed transactions with RMG and Symon, they can purchase shares on the open market for a price below that at which they sold shares to DOOH.  To the extent that the Company may have violated Rule 14e-5, the Company respectfully submits that the affected stockholders have not suffered any damages as a result, and effectively have a remedy equivalent to (and actually more favorable than) rescission rights available to them.

 

The Company has added disclosure regarding the potential violation of Rule 14e-5, including the fact that that the Company may be subject to monetary or injunctive penalties under Section 14(e) of the Exchange Act, under the section of the Offer to Purchase captioned “Important Notices Regarding the Offer” preceding the table of contents and under the section of the Offer to Purchase captioned “The Offer—Purpose of the Offer; Certain Effects of the Offer” on page 64.

Selected Historical Financial Information, page 34

 

 

 

 

 

 

 

 

 

The supplemental material requested is being submitted concurrently with this response under separate cover in accordance with 17 C.F.R. § 200.83 (“Rule 83”) and Rule 12b-4 of the Securities Exchange Act of 1934, as amended (“Rule 12b-4”).  We request that the supplemental materials be kept confidential under Rule 12b-4, and, as applicable, under Rule 83, and that the supplemental materials be returned in full in accordance with Rule 12b-4.

 

 

 

 

 

 

 

 

 

 

RESPONSE:

 

In response to the Staff’s comment, the Company has added a discussion of the material opportunities, challenges and risks associated with integrating the business of RMG and Symon to the Company’s MD&A, beginning on page 87.

 

 

 

 

 

 

 

 

The Company has added disclosure on pages 101 and 106 in response to the Staff’s comment.

 

 

 

RESPONSE:

 

The Company has added disclosure on pages 104 and 106 in response to the Staff’s comment.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company supplementally advises the Staff that compensation disclosure has not been provided for RMG’s Interim Chief Financial Officer pursuant to Regulation S-K Item 402(m)(2) because he was not one of RMG’s two most highly compensated executive officers other than the Chief Executive Officer during fiscal 2012. Moreover, Mr. Zielinski’s total compensation during fiscal 2012 for the period in which he served as Interim Chief Financial Officer was less than $100,000.  We further advise the Staff that Mr. Zielinski began serving as Interim Chief Financial Officer in December 2012.  From May 2012 until December 2012, Mr. Zielinski provided financial consulting services to RMG on an ad hoc basis and was engaged to assist on projects, as needed, but was not involved in the day-to-day management or affairs of the finance function at RMG.  As such, prior to December 2012, Mr. Zielinski would not have met the definition of an “executive officer” under Rule 3b-7 of the Exchange Act.  In response to comment 16, and to clarify the time at which Mr. Zielinski assumed the role of Interim Chief Financial Officer, the disclosures on pages 26 and 114 has been revised.

 

 

 

 

 

 

 

 

 

 

 

 

 

RESPONSE:

 

In response to the Staff’s comment, as requested, we are supplementally submitting under separate cover marked copies of the PQ Media report that support these statements, clearly cross referencing each statement with the underlying factual support.  The Company supplementally confirms that Symon did not commission any of PQ Media’s reports.

 

 

 

 

 

In response to the Staff’s comment, additional disclosure has been included on page 123 to clarify that none of Symon’s four patents are material to its business.

 

 

 

 

 

 

 

 

 

Unaudited Condensed Combined Pro Forma Financial Information, page 140

 

 

 

The pro forma financial information on page 143 has been revised to identify Symon as the predecessor company.

Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 2011, page 142

 

 

 

 

 

 

 

The disclosure for Adjustment (V) has been revised has been revised in response to the Staff’s comment.  The Company notes that as a result of updating Symon’s financials to include its January 31, 2013 year end, the amount of goodwill has changed from $21,945,782 to $20,047,290.

 

 

 

 

 

The disclosure for Adjustment (l) has been revised in response to the Staff’s comment to break out the $6,812,248 in transaction costs.

 

 

 

 

 

 

 

The Company supplementally advises the Staff that on March 13, 2013, the Company issued an amendment to its Form 10-K for the year ended December 31, 2011.  In that report, page F-2 includes a paragraph which addressed the disclosures contained in Note C.  In accordance with the standard, once the auditor’s report is initially issued, the paragraph need not be repeated in subsequent periods as defined in AU-C 708.13.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company supplementally advises the Staff that securities held in trust at December 31, 2012, had a maturity of January 24, 2013 and, as a result, matured earlier than the date on which distribution of the Trust Account would occur.

Reach Media Group Holdings, Inc.

 

 

 

 

 

 

 

 

 

 

The disclosure on page 111 has been revised in response to the Staff’s comment. The Company is supplementally providing the Staff with copies of typical revenue share agreements, one with a minimum annual guarantee and one without. The supplemental material requested is being submitted concurrently with this response under separate cover in accordance with Rule 83 and Rule 12b-4.  We request that the supplemental materials be kept confidential under Rule 12b-4, and, as applicable, under Rule 83, and that the supplemental materials be returned in full in accordance with Rule 12b-4.

 

 

In addition, the Company supplementally advises the Staff as follows:

 

The percentage of RMG’s revenue shared in 2012 under arrangements (1) with a MAG was 26%, (2) based on a percentage of the advertising revenue following collection from customer was 72%, (3) with Virgin Airlines was 1%, and (4) with payment terms other than those listed was 1%.

 

Regarding the disclosure that to the extent RMG is unable to sell sufficient advertising from which the revenue share to the airlines exceeds the MAG, it suffers a loss. For example,  January 2013 MAG to Airline X was $374,000. The advertising revenues for Airline X’s network for the same month was $132,000, resulting in a loss of $242,000 for the month from that network.

 

Under partnership arrangements for which there is no MAG, the agreement terms indicate payment on “collected net advertising revenues”, so RMG is not required to pay the partner if revenues are not collected. In general all of the advertisers are good credit risks, so the situation has not presented itself.

 

The agency or advertiser specifies the network on which its advertisements can be shown, which dictates the pricing.

 

RMG’s analysis of the indicators of net revenue reporting listed at ASC 405-45-45 is as follows:

 

45-16  Whether a supplier or an entity is responsible for providing the product or service desired by a customer is a strong indicator of the entity’s role in the transaction. If a supplier (and not the entity) is responsible for fulfillment, including the acceptability of the products or services ordered or purchased by a customer, that fact may indicate that the entity does not have risks and rewards as principal in the transaction and that it should record revenue net based on the amount retained (that is, the amount billed to the customer less the amount paid to a supplier). Representations (written or otherwise) made by an entity during marketing and the terms of the sales contract generally will provide evidence as to a customer’s understanding of whether the entity or the supplier is responsible for fulfilling the ordered product or service.

 

RMG is the primary obligor in the advertising agreement with the customer and is responsible for fulfillment of the advertising order, not the airline partner.

 

45-17  If an entity earns a fixed dollar amount per customer transaction regardless of the amount billed to a customer or if it earns a stated percentage of the amount billed to a customer, that fact may indicate that the entity is an agent of the supplier and should record revenue net based on the amount retained.

 

The amount RMG earns is dependent upon whether there is a MAG or revenue sharing-only agreement in place and whether RMG is able to collect on the advertising contract with customers. RMG does not earn any fixed dollar amount. RMG pays a fixed percentage and/or MAG to the airline partner.

 

 

45-18  If credit risk exists (that is, the sales price has not been fully collected prior to delivering the product or service) but that credit risk is assumed by a supplier, that fact may indicate that the entity is an agent of the supplier and, therefore, the entity should record revenue net based on the amount retained.

 

RMG assumes the majority of credit risk in the advertising agreement with the customer. RMG clearly is at risk on all contracts with airline partners. The MAGs are an immediate monthly payment obligation, and lack of performance to the expectation of the airline under a revenue sharing agreement would result in probable loss of the contractual agreement. A sales agent would not have either credit risk nor commitment obligations.

 

 

 

 

 

 

 

The disclosure on page 98 has been corrected to change the date to April 2011.

 

 

 

 

 

 

 

 

 

In response to the Staff’s comment, the discussion of Symon’s revenue generated through indirect partner channels has been expanded to include disclosure related to the materiality of such revenue, typical sales terms, how Symon accounts for such sales and its impact on revenue recognition.

 

*          *          *

Please do not hesitate to contact the undersigned should you have any questions or if you would like to discuss any of the above responses.

Sincerely yours,

/s/ Ameer Ahmad

Ameer Ahmad