SecProbe.io

CORRESP
1
filename1.htm

NITCHES, INC.
10280 Camino Santa
Fe
San Diego, California 92121

November 6, 2007

VIA EDGAR

Ms. Robyn Manuel
U. S. Securities and Exchange Commission
Division of
Corporation Finance
100 F. Street, N.E.
Washington, D.C. 20549

    Re:

    Nitches, Inc.

    Forms 10-K and 10-K/A for Fiscal Year Ended August 31,
      2006

    Filed December 14, 2006 and January 31,
  2007

    Forms 10-Q and 10-Q/A for Fiscal Quarters Ended November
      30, 2006,

    February 28, 2007 and May 31, 2007

    File No. 0-13851

Ms. Manuel:

     This
letter contains the responses of Nitches, Inc. ("we," "our," "us" or the
"Company"), to the comments of the staff (the "Staff") of the Securities and
Exchange Commission (the "Commission") set forth in its comment letter dated
September 13, 2007 (the "Comment Letter") with respect to the above referenced
filings. We filed amendments to each of the above reports on October 26,
2007.

     We have
reproduced below in bold font each of the Staff's comments set forth in the
Comment Letter. Immediately following each such comment is the Company's
response in regular font. The Company's responses in this letter correspond to
the numbers placed adjacent to the Staff's comments in the Comment
Letter.

Form 10-Q for Fiscal Quarter Ended
February 28, 2006

Item 1. Financial
Statements

Note. 9. Stock-Based
Compensation

COMMENT 1. We have reviewed your
response to comment two in our letter dated May 29, 2007. Please show us exactly
how you computed share-based compensation expense for each of the first three
quarters of fiscal 2007 as it remains unclear how your computation complies with
SFAS 123R. In particular, it appears you have only recorded compensation expense
to the extent of the immediate grant date vesting of each of the option awards
whereas we would expect you to record additional expense associated with the
continued vesting of these awards during the periods. Moreover, it remains
unclear how you considered expected forfeitures in computing share-based
compensation cost. Please advise. Finally, as previously requested, please tell
us and disclose the requisite service periods and vesting terms of the stock
option awards. In filing your amended Forms 10-Q for the periods ended November
30, 2006, February 28, 2007 and May 31, 2007, please ensure you comply with the
disclosure requirements in SFAS 154 with respect to the restatement of
previously issued financial statements.

     RESPONSE. During the first three
months of fiscal 2007 we granted options to purchase up to 305,000 shares of our
common stock. During the three months ended February 28, 2007 we granted options
to purchase up to an additional 135,000 shares of our common stock. We did not
grant any other options through May 31, 2007. All options granted vest at a rate
of 25% immediately upon grant date and 75% ratably per month over the 36 month
service period commencing on the first anniversary of the grant date.

     Accordingly, as of November 30, 2006, options to purchase 76,250 shares
of common stock were vested and exercisable and as of February 28, 2007, options
to purchase an additional 33,750 shares of common stock were vested and
exercisable. As of May 31, 2007, options to purchase 110,000 shares of our
common stock were vested and exercisable. Each of our amended filings discloses
the relevant requisite service periods and vesting terms of the option.

     With
respect to expected forfeitures, at the time of the grant of the options, we did
not have any recent option history to use as a reference with respect to
anticipated forfeitures. Also, we have historically experienced very little
turnover in our employment base. Accordingly, we took what we believed was the
most conservative approach, calculating the compensation expense on the basis
that there would be no expected forfeitures. Our amended filings have been
revised to disclose that compensation expense was calculated assuming that no
forfeitures would occur.

     We have
included a disclosure in each of our amended Forms 10-Qs for the periods ended
November 30, 2006, February 28, 2007 and May 31, 2007 to comply with the
disclosure requirements in SFAS 154 with respect to the restatement of
previously issued financial statements.

Form 10-Q/A for Fiscal Quarter Ended
May 31, 2007

Item 1. Financial
Statements

Note. 15. Pending
Restatements

COMMENT 2. In your response to
comment one in our letter dated May 29, 2007, you take the position that you
will not restate your historical financial statements for the errors you have
identified in your income tax accounting due to materiality considerations. This
position appears to be inconsistent with the presentation and disclosure in the
filing. Based on our teleconference on September 5, 2007, we understand that you
intend to file an amendment to restate your financial statements to conform to
the position taken in your correspondence. In the amendment, please ensure you
comply with the disclosure requirements of SFAS 154 with respect to the
restatement. Also disclosure in a reasonable amount of detail the nature and
amount of the income tax accounting error(s) included in previously issued
financial statements and your basis for not restating those financial statements
to correct such errors.

     RESPONSE. The amendment we filed to
our Quarterly Report on Form 10-Q/A for the period ended May 31, 2007 (Amendment
No. 2) ("Amendment No. 2"), states that after further analysis, we determined
that although there was an error in the calculation of the income tax provision
for 2005, correcting the issue would not be material to our operating results.
The correction, if made, would reduce net income for 2006 by $103,000 and
correspondingly reduce the net loss recorded in 2005 by the same amount. While
the changes to our fiscal 2006 financial statements would be quantitatively
significant when measured as a percentage of net income (the effect on our
statement of operations would be to reduce our net income from $468,000 or $0.11
per share to $365,000 or $0.09 per share, a percentage change of 22.0%), the
significance is largely attributable to the nominal amount of net income
recorded in the period. Amendment No. 2 also states that we believe that it is
not quantitatively significant when

2

compared to the overall scale of our
financial position or results of operation, and that we also do not believe that
the change would be material from a qualitative standpoint. During 2006 we
completed three acquisitions that had a significant impact on our operations in
2006 and are expected to have a larger impact on our operations for 2007. We
believe that investors who are evaluating our stock will be concerned with a
multitude of factors such as financial position, gross profit margin, new
product initiatives, and integration of acquisitions. Amendment No. 2 goes on to
state that based on this analysis, we do not believe that change is material
from a quantitative or qualitative standpoint, and accordingly do not intend to
amend and restate our financial statements for the year ended August 31,
2006.

     In
addition, we included a disclosure in Amendment No. 2 to comply with the
disclosure requirements in SFAS 154 with respect to this matter.

     We
confirm that our Annual Report on Form 10-K for the period ended August 31, 2007
will discuss the nature and amount of the error in the calculation of the income
tax provision for 2005 and 2006 and disclose our basis for not restating our
financial statements for the year ended August 31, 2006.

*
*     *     *
*     *

     Thank you
for your assistance in this matter. Please call me at (858) 731-0520 or James A.
Mercer III of Duane Morris LLP, our outside legal counsel, at (619) 744-2209 if
you have any questions, or if we can be of any assistance.

    Sincerely,

    /s/ Steven P.
      Wyandt

    Chief Executive
      Officer

3