SecProbe.io

CORRESP
1
filename1.htm

NITCHES ,inc
 10280 CAMINO SANTA FE, SAN DIEGO, CA  92121

March 7, 2006

Sarah Goldberg
 U. S. Securities and Exchange Commission
 Division Of Corporation Finance
 100 F Street, N.E., Mail Stop 3561
 Washington, D.C.   20549

Re:

Nitches,   Inc.

File No.   0-13851

Dear Sarah,

In connection with  responding to the comments regarding the filings of Nitches, I acknowledge that :

1.

Nitches is   responsible for the adequacy and accuracy of the disclosures in the filings;

2.

SEC staff   comments or changes to disclosures in response to SEC staff comments do not   foreclose the Commission from taking action with respect to the filings; and

3.

Nitches may   not assert SEC staff comments as a defense in any proceeding initiated by the   Commission or any person under the federal securities laws of the United   States.

Comment  1

The assignment of the receivables on a non-recourse basis constitutes a sale of a financial asset as defined in paragraph 9 of SFAS 140.  Then, under paragraph 11(b) of SFAS 140 the seller is to recognize all assets obtained and liabilities incurred in consideration as proceeds of the sale. Furthermore, I have reviewed FIN 39 and have confirmed with our factor, CIT, that in practice we have the right of offset, and that the netting of advances due to factor against receivables due from factor is consistent with the treatment by their other public client companies. A review of public filings identified Bernard Chaus, Inc., factored by CIT and Cygne Designs, Inc. factored by Milberg as using the same presentation. Further, however, it would also appear that SFAS 140 is not modified by FIN 39 as paragraph 7 of FIN 39 states that it does not modify SFAS’s.

Comment  2

The assignment of the receivables on a non-recourse basis constitutes a sale of a financial asset as defined in paragraph 9 of SFAS 140.  Then under paragraph 11(b) of SFAS 140 the seller is to recognize all assets obtained and liabilities incurred in consideration as proceeds of the sale. As proceeds of the sale the advances (liabilities incurred in consideration) satisfy the criteria of an operating cash flow as defined in paragraph 22(a) of SFAS 95. Designer Intimates, Inc has a factoring agreement with CIT that has all of the same features that Nitches’ agreement has. Therefore, Designer Intimates, Inc will have the same presentation as Nitches does based on SFAS 140 and SFAS 95 as sited in this paragraph and for the Comment 1 paragraph.

Comment  3

I have reviewed paragraph 48 of SFAS 109 and we have amended Income Taxes , page 26, to include a schedule disclosing the amount and expiration of our net operating loss carry forward.

Comment  4

I have reviewed Item 307 of Regulation S-K and in future filings I will refer to the disclosure controls and procedures defined in Exchange Act Rules 13a-15(e)  and 15d-15(e)  which I also have reviewed.

Comment  5

In future filings I will revise to state “as of the end of the period covered by the report.” I confirm that the evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures  for the Form 10-K for fiscal year ended August 31, 2005 and Form 10-Q for the fiscal quarter ended November 30, 2005 took place as of the end the period covered by the respective report. The evaluation is one of the steps in the accounting closing process for a period end.

Comment  6

In the future filings I will ensure that it is true and state that the controls and procedures were effective in  “ ensur[ing] that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.” I confirm that for Form 10-K for fiscal year ended August 31, 2005 and Form 10-Q for the fiscal quarter ended November 30, 2005 my conclusion regarding effectiveness would not change had such statements been included in the filing.

2

Comment  7

I confirm that for Form 10-K for fiscal year ended August 31, 2005 and Form 10-Q for the fiscal quarter ended November 30, 2005 that we have had no change in internal control over financial reporting during the respective last fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

Comment  8

I have reviewed General Instruction G(3) to Form 10-K and we have amended Form 10K, Part III, to provide the required information.

Comment  9

We have amended Form 10-K, Exhibit 31, to revise paragraphs 4 a), 4 b), and 5 a) as required. We have not altered the language of the certifications required by Section 302 of Sarbanes Oxley and Item 601(b)(31) of Regulation S-K.

Comment 10

We have amended the Form 10-Q for the Fiscal Quarter Ended November 30,2005 to include Note 10 to the Condensed Consolidated Financial Statements, Goodwill and Intangible Assets, as required by paragraph 45 of SFAS 142.

Comment 11

The allowance must be looked at as a percentage of total receivables, including non-recourse receivables.  The basis of the question is an analysis of the “allowance for customer credits and doubtful accounts” as a percentage of only “receivables assigned to factor with recourse” and “non-factored accounts receivable”.  However, the allowance includes substantial reserves for warehousing credits and other allowances to certain customers (see Critical Accounting Policies) for which accounts receivable have been assigned to the factor without recourse.  Although the factor assumes the risk of collectibility on these non-recourse receivables, customer credits and allowances remain the responsibility and cost of the company and get passed through from the factor.  When analyzed as a percent of total receivables, the allowance actually decreased from 6.1% to 4.1%.

Comment 12

We have revised our disclosure, Valuation of Goodwill, Long-Lived Assets and Intangible Assets, to describe our annual impairment tests.

3

Comment 13

Shipping and handling costs differ from shipping and warehousing expenses.  Shipping and handling costs refer primarily to freight-related charges billed by third parties (e.g. APL, Maersk, FedEx, UPS, Roadway) for the transportation of product from factories to the company’s warehouse and from the company to customers’ store locations or distribution centers.  Designer Intimates also includes shipping and handling in costs of goods sold. Shipping and warehousing expenses as reported in SG&A refer to those expenses incurred by the company for the operation of its warehouse, including wages, rent, equipment and utilities.   Designer Intimates also classifies these expenses in the same way.

Comment 14

We have amended Form 10Q, Exhibit 31.1, paragraph 4, to refer to the disclosure controls and procedures defined in Exchange Act Rules 13a-15(e)  and 15d-15(e) and  to revise paragraphs 4 a), 4 b), and 5 a) as required. We have replaced references to “quarterly report” and “annual report” with “report”. We have not altered the language of the certifications required by Section 302 of Sarbanes Oxley and Item 601(b)(31) of Regulation S-K.

Comment 15

We have amended the 8-K to revise the $500,000 inflow to be classified as a cash inflow from financing activities.

Comment 16

Designer Intimates was incorporated on April 26, 2002, but it had no operations prior to it’s acquisition of NAP, Inc. on September 30, 2002.

Comment 17

We have revised the pro forma deferred income taxes to comply with paragraph 38 of SFAS 141.

Sincerely,

/s/ Steven   P. Wyandt

Steven P.   Wyandt

CEO &   CFO

4

          Differences between the statutory Federal income tax rate and the effective tax rate as a percentage of pre-tax income are as follows:

  Year ended   August 31,

2005

2004

2003

  Statutory rate

(36.0

)%

34.0

%

(34.0

)%

State income taxes, net of   Federal benefit

(5.8

)%

5.8

%

(5.8

)%

  State NOL limitation

0.0

%

0.0

%

2.0

%

(Gain)/loss on equity   investment

(0.1

)%

(0.5

)%

6.7

%

  Nondeductible entertainment expenses

0.0

%

0.2

%

0.0

%

Other items

(0.1

)%

0.5

%

0.6

%

Effective rate

(42.0

)%

40.0

%

(30.5

)%

COMMENT 3 AMENDMENT

          The amount and expiration dates of net operating loss carry forwards are as follows:

  Expiring   August 31,

2014

2015

2025

  Federal

$

—

$

—

$

1,644,978

State

520,039

1,146,187

END COMMENT 3 AMENDMENT

7.  Employee Benefit Plans

          The Company has a 401(k) Savings Plan, whereby employees may make investments in various independent funds and Company stock.  The Company may match employee contributions to this Plan on a discretionary basis or contribute on a profit sharing basis.  The Company made no matching or profit sharing contributions to this Plan in fiscal 2005, 2004, or 2003.

8.  Stock Options and Dividends

Stock Options

          No stock options were outstanding as of August 31, 2005, 2004 or 2003.  The Company does not have an active stock option plan.

Dividends

          During fiscal 2005 and 2004 the Company did not declare a dividend.  However, during fiscal 2003 the company declared and paid cash dividends of $0.30 per share.

9.  Leases

     The Company has lease commitments expiring at various dates through September 2006, principally for real property and equipment.  The aggregate minimum rental commitments for future years ending August 31 for all non-cancelable leases having initial or remaining terms of one or more years are as follows:

5

PART III

Item 10 - Directors and Executive Officers of the Registrant

COMMENT 8 AMENDMENT

          Mr. Steven Wyandt has been a director since 1989.  He has been CEO of the Company since 1987.  Mr. Wyandt was a director and Chairman of Body Drama, Inc. until August 31, 1998, which at the time was a wholly owned subsidiary of the Company but was merged into the Company as of that date.  Steven Wyandt is the father of Paul Wyandt, an officer and director of the Company.

          Mr. Paul Wyandt has been a director since 2001.  He has been President and COO since 2001.  He has been with the Company in the areas of finance, accounting, marketing and technology since 1997.  Prior to that, he was Vice President of Finance and Operations of CMS Technologies, a company that designed hardware and software for personal computer security.

          Mr. Price has been a director since 1973.  From 1973 until he retired in May 1987, Mr. Price was a Vice President of the Company with primary responsibilities in sales and administration.

          Mr. Sholtis is a seasoned retail executive with over 30 years of management experience with regional and national retailers including Belk Stores, McCraes, Sears, May Company and Allied Stores.  He is a current member of the Retail, Textile and Marketing Board of the University of North Carolina, Greensboro.

          Mr. Straub has served since 1975 as the president of Profit Management Consultants, a firm specializing in strategic planning, capital finance, and mergers & acquisitions.  He also teaches courses in finance and international business as an adjunct professor at Webster University.  Mr. Straub was previously a founder and executive team member of Fotomat Corporation, a retail film development company, from 1967-1975. Mr. Straub is Chairman of the Audit Committee and Financial Expert of the Audit Committee.

          Mr. Price, Mr. Sholtis and Mr. Straub are independent directors as defined in NASD Rule 4200.

Item 11 - Executive Compensation

          The following table shows the compensation provided to the Chief Executive Officer and each of the other most highly-compensated executive officers who served as such at the end of fiscal 2005 and whose annual compensation exceeds $100,000:

  Long Term   Compensation

  Annual   Compensation

Awards

Payouts

  Name/Title
   Year

Salary
   $

Bonus
   $

Other
   Annual
   Comp.
   $

Restricted
   Stock
   Awards
   $

Securities
   Underlying
   Options/
   SARs
   #

LTIP
   Payouts
   $

All
   Other
   Comp.

  Steven P.   Wyandt
   CEO & CFO
             2005
             2004
             2003

250,000
   250,000
   250,000

—
   —
   —

—
   —
   —

—
   —
   —

—
   —
   —

—
   —
   —

—
   —
   —

  Paul M.   Wyandt
   President & COO
             2005
             2004
             2003

160,000
   160,000
   160,000

—
   —
   —

—
   —
   —

—
   —
   —

—
   —
   —

—
   —
   —

—
   —
   —

6

There were no stock options outstanding or granted during fiscal year 2005.

          The Company extended an employment agreement with Steven P. Wyandt, effective September 1, 2001 through August 31, 2004.  Pursuant to this agreement, Mr. Wyandt serves as Chief Executive Officer and Chief Financial Officer of the Company.  The agreement provides for a base annual salary of $250,000, or a higher amount as the Board of Directors may approve.  In addition, Mr. Wyandt may receive a bonus at the discretion of the Board of Directors. No bonus was paid to Mr. Wyandt during fiscal 2003, 2004, or 2005.  The agreement continues on a month-to-month basis after August 31, 2004.

          The Company entered into an employment agreement with Paul M. Wyandt, effective September 1, 2001 through August 31, 2004.  Pursuant to this agreement, Mr. Wyandt serves as President and Chief Operating Officer of the Company.  The agreement provides for a base annual salary of $160,000, or a higher amount as the Board of Directors may approve.  In addition, Mr. Wyandt may receive a bonus at the discretion of the Board of Directors. No bonus was paid to Mr. Wyandt during fiscal 2003, 2004, or 2005.  The agreement continues on a month-to-month basis after August 31, 2004.

Item 12 - Security Ownership of Certain Beneficial Owners and Management

          The following table sets forth, as of February 10, 2006, certain information with respect to the beneficial ownership of Common Stock by (a) each person known by the Company to be the beneficial owner of more than 5% of its outstanding Common Stock, (b) any of the Company’s directors and (c) all directors and officers as a group.  Except as noted below, to the best of the Company’s knowledge, each of such persons has sole voting and investment power with respect to the shares beneficially owned.

  Name and Address of Beneficial Owner (1)(2)

Number of
   Shares

Percent of   Class
   Outstanding

Steven P.   Wyandt (3)

1,298,349

32.0

%

  Eugene B.   Price II

69,417

1.7

%

All   directors and current officers as a group (5 persons)

1,367,766

33.7

%

Haresh T.   Tharani

450,000

11.1

%

  1400   Broadway, 33rd Floor

New York, NY   10018

(1)

Except as   otherwise indicated, the address of each beneficial owner is c/o Nitches,   Inc., 10280 Camino Santa Fe, San Diego, CA 92121.

(2)

Except as   otherwise indicated, the persons named in this table have sole voting and   investment power with respect to all shares of common stock listed.

(3)

A portion of   the shares of Steven P. Wyandt are owned indirectly in Trusts, the terms of   which establish sole voting power in Mr. Wyandt.

(4)

Includes   300,000 restricted shares (adjusted for the 200% stock dividend of January 3,   2006) Mr. Tharani received as a result of the Company’s acquisition of   Designer Intimates, Inc.

Item 13 - Certain Relationships and Related Transactions

          None.

END COMMENT 8 AMENDMENT

7

Exhibit 31

CERTIFICATIONS

COMMENT 9 AMENDMENT

I, Steven P. Wyandt, certify that:

1.  I have reviewed this annual report on Form 10-K of Nitches, Inc.;

2.  Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light