SEC Comment Letter for AMERICAN BUSINESS CORP (CIK 0000820408) — Dec 13, 2005
AMERICAN BUSINESS CORP (CIK 0000820408)
Date: Dec. 13, 2005 · CIK: 0000820408 · Accession: 0000000000-05-061899
AI Filing Summary & Sentiment
Letter
Mail Stop 3561 Via US Mail and Facsimile Mr. Anthony R. Russo Chief Financial Officer 222 Grace Church Street, Suite 300 Port Chester, New York 10573
Re: American Business Corporation Form 10-KSB for the year ended December 31, 2004 Forms 10-QSB for the quarters ended March 31, 2005, June 30, and September 30, 2005 Commission file #: 033-16417-LA
Dear Mr. Russo:
We have reviewed your November 23, 2005 response letter and have the following comments. Where expanded or revised disclosure is requested, you may comply with these comments in future filings. If you disagree, we will consider your explanation as to why our comments are inapplicable or a revision is unnecessary. We also ask you to provide us with supplemental information so we may better understand your disclosure. Please be as detailed as necessary in your explanation. We look forward to working with you in these respects and welcome any questions you may have about any aspects of our review.
* * * * * * * * * * * * * * * * * * * * * * *
Form 10-KSB for the year ended December 31, 2004
Item 3. Legal Proceedings, page 11
1. We note from your response to our prior comment 1 that the estimated liability of $4,440,657 recorded in the financial statements and referred to in Item 3, is the same as the estimated guaranteed obligations of former subsidiaries discussed in Note 4 to the financial statements. In future filings, please revise or cross- reference your disclosures in Note 4 and Item 3 to clarify the nature of the amount and that it is recorded as a liability in the financial statements. Additionally, as previously requested, please specifically tell us whether the judgment of $370,000 related to the Carangela Holdings was accrued or paid during 2004.
2. We note your response to our prior comment 2, however we do not believe that it adequately responds to our comment. Specifically, please tell us if you have established an accrual for the Margolies litigation and if so, the amount of the accrual. If no accrual was made because one or both conditions in paragraph 8 of SFAS No. 5 were not met, please confirm to us that you will include the disclosures required by paragraph 10 of SFAS No. 5. Additionally, please provide us with draft language of your revised disclosure.
Financial Statements Balance Sheets, page 19
3. We note from your response to our prior comment 5 that the loans payable amount relates to unsecured notes which have no restrictive covenants and are not currently subject to interest accrual. In addition to disclosing this information in future filings, also disclose the maturity dates and interest rates applicable to the notes. Also, supplementally tell us, with a view toward expanded disclosure, your rationale for not accruing interest on the notes since March 2002 and the amount of unrecognized expense for each year in the three years ended December 31, 2004 and the literature supporting your accounting treatment. We may have further comments upon receipt of your response.
4. We note from your response to our prior comment 6 that you have stated the nature and terms of the convertible debentures. Please confirm to us that in future filings you will include this information in the notes to the financial statements.
Notes to the Financial Statements
Note 4 - Discontinued Operation and Net Liabilities of Discontinued Operations, page 24
5. We note from your response to our prior comment 8 that the gain from discontinued operations of $3,928,940 in 2003 resulted from the settlement of $4,000,000 of obligations for the claims for certain creditors of your former operating business. Please tell us if this $4,000,000 in obligations was recorded on the balance sheet prior to the gain recognition and if so, the line item on the balance sheet that included the amount. If the amount was not previously recorded as a liability, please tell us why you believe it was appropriate not to record the amount at the time the obligation was incurred. Also, supplementally provide us with an annual analysis of charges and accruals related to discontinued operations. Your analysis should begin with the original loss of $38,205,215 recognized in fiscal year 2000, and the related accrual at December 31, 2000. Please describe by year, material changes to accruals, such as cash payments made, reversals or adjustments to changes through the year ended December 31, 2004. Expand MD&A to discuss the timing of cash payments to be made as a result of your guaranteed obligations and when you expect to resolve all such obligations.
6. We note from your response to our prior comment 10 that your balance sheet at September 30, 2005 has been revised to reflect the redemption value of the Series B preferred stock as a liability. For consistency purposes, please revise your balance sheet in future filings to present the Series B preferred stock as a liability in all periods presented. Also the presentation in the statement of stockholders` equity (deficit) should be revised in future filings to present the 2,000 Series B preferred shares as remaining in equity with only the amount of $2,000,000 reclassed to liabilities. Additionally, please add a note to the financial statements stating that certain reclassifications have been made to the prior years` financial statements to conform to the current year presentation and that the reclassifications had no effect on previously reported results of operations or retained earnings.
7. We note from your response to our prior comment 11 that upon issuing convertible preferred stock you charged the amounts to operations and credited to the equity section. In future filings, please disclose this accounting treatment in the notes to the financial statements.
8. We note from your response to our prior comment 12 that you will disclose the "as converted" common share equivalents of your preferred stock and follow the guidelines of EITF 98-5 and EITF 00-27 in future filings. However, the intention of our prior comment was to determine how you applied the guidelines of EITF 98-5 and EITF 00-27 at the time the convertible preferred stock was issued. Specifically, please tell us if you analyzed the conversion terms of the Series A, B, C, D and E preferred shares for the existence of a beneficial conversion feature at the time of each issuance. If you did not previously perform this analysis, please prepare an analysis indicating whether a beneficial conversion feature should have been recorded at the time of the issuance of the convertible note and the related impact on your financial statements, if applicable.
Note 7. Common Stock
9. We note from your response to our prior comment 13 that you believe your current presentation of the 6% Secured Convertible Note due Brentwood Capital is compliant. Please tell us how you analyzed the convertible note at the time of issuance according to the guidelines of EITF 98-5 and EITF 00-27. Specifically, please tell us how you analyzed the convertible note and it conversion terms for the existence of a beneficial conversion feature. If you did not previously perform this analysis, please prepare an analysis indicating whether a beneficial conversion feature should have been recorded at the time of the issuance of the convertible note and the related impact on your financial statements, if applicable.
Other
10. As previously requested, in connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that:
the company is responsible for the adequacy and accuracy of the disclosure in the filings;
staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
the company may not assert staff comments 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 our review of your filing or in response to our comments on your filing.
* * * * * * * * * * * * * * * * * * * * * * *
As appropriate, please respond to these comments via EDGAR within business days or tell us when you will provide us with a response. Please furnish a cover letter that keys your responses to our comments and provides any requested supplemental information. Please understand that we may have additional comments after reviewing your responses to our comments.
You may contact Claire Erlanger at 202-551-3301 or Kathy Mathis at 202-551-3383 if you have questions.
Sincerely,
Joseph A. Foti
Senior Assistant Chief
Accountant
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Show Raw Text
<DOCUMENT>
<TYPE>LETTER
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
December 13, 2005
Mail Stop 3561
Via US Mail and Facsimile
Mr. Anthony R. Russo
Chief Financial Officer
222 Grace Church Street, Suite 300
Port Chester, New York 10573
Re: American Business Corporation
Form 10-KSB for the year ended December 31, 2004
Forms 10-QSB for the quarters ended March 31, 2005, June 30,
2005
and
September 30, 2005
Commission file #: 033-16417-LA
Dear Mr. Russo:
We have reviewed your November 23, 2005 response letter and have
the
following comments. Where expanded or revised disclosure is
requested, you may comply with these comments in future filings.
If
you disagree, we will consider your explanation as to why our
comments
are inapplicable or a revision is unnecessary. We also ask you to
provide us with supplemental information so we may better
understand
your disclosure. Please be as detailed as necessary in your
explanation. We look forward to working with you in these
respects
and welcome any questions you may have about any aspects of our
review.
* * * * * * * * * * * * * * * * * * * * * * *
Form 10-KSB for the year ended December 31, 2004
Item 3. Legal Proceedings, page 11
1. We note from your response to our prior comment 1 that the
estimated liability of $4,440,657 recorded in the financial
statements
and referred to in Item 3, is the same as the estimated guaranteed
obligations of former subsidiaries discussed in Note 4 to the
financial statements. In future filings, please revise or cross-
reference your disclosures in Note 4 and Item 3 to clarify the
nature
of the amount and that it is recorded as a liability in the
financial
statements. Additionally, as previously requested, please
specifically tell us whether the judgment of $370,000 related to
the
Carangela Holdings was accrued or paid during 2004.
2. We note your response to our prior comment 2, however we do not
believe that it adequately responds to our comment. Specifically,
please tell us if you have established an accrual for the
Margolies
litigation and if so, the amount of the accrual. If no accrual
was
made because one or both conditions in paragraph 8 of SFAS No. 5
were
not met, please confirm to us that you will include the
disclosures
required by paragraph 10 of SFAS No. 5. Additionally, please
provide
us with draft language of your revised disclosure.
Financial Statements
Balance Sheets, page 19
3. We note from your response to our prior comment 5 that the
loans
payable amount relates to unsecured notes which have no
restrictive
covenants and are not currently subject to interest accrual. In
addition to disclosing this information in future filings, also
disclose the maturity dates and interest rates applicable to the
notes. Also, supplementally tell us, with a view toward expanded
disclosure, your rationale for not accruing interest on the notes
since March 2002 and the amount of unrecognized expense for each
year
in the three years ended December 31, 2004 and the literature
supporting your accounting treatment. We may have further
comments
upon receipt of your response.
4. We note from your response to our prior comment 6 that you have
stated the nature and terms of the convertible debentures. Please
confirm to us that in future filings you will include this
information
in the notes to the financial statements.
Notes to the Financial Statements
Note 4 - Discontinued Operation and Net Liabilities of
Discontinued
Operations, page 24
5. We note from your response to our prior comment 8 that the gain
from discontinued operations of $3,928,940 in 2003 resulted from
the
settlement of $4,000,000 of obligations for the claims for certain
creditors of your former operating business. Please tell us if
this
$4,000,000 in obligations was recorded on the balance sheet prior
to
the gain recognition and if so, the line item on the balance sheet
that included the amount. If the amount was not previously
recorded
as a liability, please tell us why you believe it was appropriate
not
to record the amount at the time the obligation was incurred.
Also,
supplementally provide us with an annual analysis of charges and
accruals related to discontinued operations. Your analysis should
begin with the original loss of $38,205,215 recognized in fiscal
year
2000, and the related accrual at December 31, 2000. Please
describe
by year, material changes to accruals, such as cash payments made,
reversals or adjustments to changes through the year ended
December
31, 2004. Expand MD&A to discuss the timing of cash payments to
be
made as a result of your guaranteed obligations and when you
expect to
resolve all such obligations.
6. We note from your response to our prior comment 10 that your
balance sheet at September 30, 2005 has been revised to reflect
the
redemption value of the Series B preferred stock as a liability.
For
consistency purposes, please revise your balance sheet in future
filings to present the Series B preferred stock as a liability in
all
periods presented. Also the presentation in the statement of
stockholders` equity (deficit) should be revised in future filings
to
present the 2,000 Series B preferred shares as remaining in equity
with only the amount of $2,000,000 reclassed to liabilities.
Additionally, please add a note to the financial statements
stating
that certain reclassifications have been made to the prior years`
financial statements to conform to the current year presentation
and
that the reclassifications had no effect on previously reported
results of operations or retained earnings.
7. We note from your response to our prior comment 11 that upon
issuing convertible preferred stock you charged the amounts to
operations and credited to the equity section. In future filings,
please disclose this accounting treatment in the notes to the
financial statements.
8. We note from your response to our prior comment 12 that you
will
disclose the "as converted" common share equivalents of your
preferred
stock and follow the guidelines of EITF 98-5 and EITF 00-27 in
future
filings. However, the intention of our prior comment was to
determine
how you applied the guidelines of EITF 98-5 and EITF 00-27 at the
time
the convertible preferred stock was issued. Specifically, please
tell
us if you analyzed the conversion terms of the Series A, B, C, D
and E
preferred shares for the existence of a beneficial conversion
feature
at the time of each issuance. If you did not previously perform
this
analysis, please prepare an analysis indicating whether a
beneficial
conversion feature should have been recorded at the time of the
issuance of the convertible note and the related impact on your
financial statements, if applicable.
Note 7. Common Stock
9. We note from your response to our prior comment 13 that you
believe
your current presentation of the 6% Secured Convertible Note due
Brentwood Capital is compliant. Please tell us how you analyzed
the
convertible note at the time of issuance according to the
guidelines
of EITF 98-5 and EITF 00-27. Specifically, please tell us how you
analyzed the convertible note and it conversion terms for the
existence of a beneficial conversion feature. If you did not
previously perform this analysis, please prepare an analysis
indicating whether a beneficial conversion feature should have
been
recorded at the time of the issuance of the convertible note and
the
related impact on your financial statements, if applicable.
Other
10. As previously requested, in connection with responding to our
comments, please provide, in writing, a statement from the company
acknowledging that:
the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
staff comments or changes to disclosure in response to staff
comments
do not foreclose the Commission from taking any action with
respect to
the filing; and
the company may not assert staff comments 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 our review of your filing or in response to
our
comments on your filing.
* * * * * * * * * * * * * * * * * * * * * * *
As appropriate, please respond to these comments via EDGAR within
10
business days or tell us when you will provide us with a response.
Please furnish a cover letter that keys your responses to our
comments
and provides any requested supplemental information. Please
understand that we may have additional comments after reviewing
your
responses to our comments.
You may contact Claire Erlanger at 202-551-3301 or Kathy Mathis at
202-551-3383 if you have questions.
Sincerely,
Joseph A. Foti
Senior Assistant Chief
Accountant
??
??
??
??
Mr. Anthony R. Russo
American Business Corporation
December 13, 2005
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