SecProbe.io

CORRESP
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filename1.htm

      September
        28, 2005

      Via
        Facsimile and Federal Express

      U.S.
        Securities and Exchange Commission

      Division
        of Corporation Finance

      450
        Fifth
        Street, N.W.

      Washington,
        D.C. 20549-0306

      Attn:
        Donald C. Hunt, Esq., Attorney Advisor

                Re:

                SpatiaLight,
                  Inc. (the “Company”), Post Effective Amendments No. 1 to Registration
                  Statements on Form S-3 filed August 23, 2005 (File No. 333-122391,
                  the
                  “Financing Registration Statement”) (File No. 333-122392, the “Shelf
                  Registration Statement”), and Documents Incorporated by Reference
                  Therein

      Ladies
        and Gentlemen:

      This
        letter is submitted to the Staff of the Division of Corporation Finance of
        the
        U.S. Securities and Exchange Commission (the “Commission”) in response to the
        comments, dated September 1, 2005, of the Staff with respect to the Company’s
        Post Effective Amendments, dated August 23, 2005 (collectively, the “Post
        Effective Amendments”) to the Financing Registration Statement and the Shelf
        Registration Statement (collectively, the “Registration Statements”) on Form S-3
        referenced above (the “Commission Letter”). For the Staff’s convenience, the
        responses set forth below are numbered to correspond to the comments in the
        Commission Letter and we have also set forth such comments for the convenience
        of the Staff.

        We
          are
          filing with the Commission via EDGAR concurrently herewith Amendment No.
          1 to
          our Quarterly Report on Form 10-Q for the period ended June 30, 2005. For
          the
          Staff’s convenience, we are also forwarding four (4) courtesy copies of such
          Amendment No. 1. These courtesy copies are marked to show changes from
          our
          original Quarterly Report on Form 10-Q. These changes reflect responses
          to the
          Staff’s comments contained in the Commission Letter, as well as the updating
          of
          certain information.

      Post-Effective
        Amendments to Forms S-3 (File Nos. 333-122391 and
        333-122392)

              1.

                Tell
                  us what legal authority you are relying on that you believe permits
                  you to
                  withdraw a required portion of a registration statement by post-effective
                  amendment.

      We
        are
        not aware of any specific regulation or statute authorizing the withdrawal,
        by
        post-effective amendment, of an auditor’s consent to incorporate by reference
        its report on a company’s financial statements for prior fiscal years. We
        recognize that the auditor’s consent constitutes a required exhibit to each of
        the Registration Statements. We respectfully submit, however, that the filing
        of
        the Post-Effective Amendments was the most effective means to inform the
        investing public of the problem with BDO’s consent and was a reasonable first
        corrective step with respect to the matter. Further, we believe this approach
        was consistent with the approach and objectives of the regulatory regime
        governing disclosures by public companies.

      If
        the
        Staff has additional guidance or would prefer that we approach the problem
        from
        a different perspective or make additional disclosures or filings, we would
        appreciate the Staff’s guidance, although we fully appreciate that it is the
        Company’s and not the Staff’s duty to undertake and effect the proper filings
        under the federal securities laws.

              2.

                We
                  note the disclosure that BDO Seidman will not grant its consent
                  to have
                  its reports on your financial statements for the years ended December
                  31,
                  2003 and 2002 incorporated into your Forms
                  S-3.

              ·

                Please
                  describe to us the circumstances surrounding the auditor’s decision not to
                  grant its consent, including the dates and content of all communications
                  with the auditor.

              ·

                Please
                  clarify for us whether the auditor has withdrawn its opinion and
                  its
                  association with these financial statements and, if so, discuss
                  the impact
                  on your Forms 10-K for the years ended December 31, 2004, 2003
                  and 2002
                  and address how you intend to alert investors of this event, taking
                  into
                  account the requirements of Item 4 of Form 8-K.

              ·

                Clarify
                  for us the impact of the auditor’s decision on its reviews of the Forms
                  10-Q you filed with the Commission during the years ended December
                  31,
                  2004, 2003 and 2002.

      We
        are
        not aware of the internal decision-making processes of BDO with respect to
        any
        decision by BDO not to grant its consent to the incorporation by reference
        of
        its reports on the Company’s financial statements for the 2002 and 2003 fiscal
        years. To the Company’s knowledge, the origin of BDO’s initial refusal to give
        its consent as to the Company’s amended Registration Statements arose from a
        billing dispute between BDO and the Company. Prior to the emergence of this
        billing issue, BDO had given the Company its consents to incorporate by
        reference BDO’s report for the Company’s audited financial statements for fiscal
        years 2003 and 2002 in connection with the filing of these same Registration
        Statements. BDO also gave its consent to incorporate by reference these same
        financial statements to the filing of four individual amendments to these
        Registration Statements (three amendments with respect to the Financing
        Registration Statement and one with respect to the Shelf Registration
        Statement). Specifically, BDO granted its consent to incorporate by reference
        the audited financial statements in our Registration Statements filed on
        January
        31, March 31, April 27, and May 13, 2005 and in our Form 10-K for the year
        ended
        December 31, 2004.

      We
        are
        aware of communications between our employees and BDO in approximately late
        June
        2005 concerning the payment of fees to BDO and the issue of consents. On
        June 19
        and June 23, 2005, Claudia Spencer, a BDO engagement partner, sent e-mails
        to
        one of our employees, in which she referred to a billing issue between the
        Company and BDO. In late June, Sandi Harrison, our Assistant Corporate
        Secretary, spoke by telephone with Ms. Spencer, who stated that consents
        would
        not be provided until outstanding invoices were paid. The Company disputed
        the
        amount of BDO’s fees and so advised BDO. It is conceivable that there were other
        conversations along these same lines. Furthermore, in early August 2005,
        our
        former Corporate Controller contacted BDO in an attempt to resolve issues
        relating to outstanding invoices. Subsequently, in mid to late August 2005,
        there were additional communications between BDO and the Company regarding
        the
        BDO consents.

      BDO
        Seidman has not withdrawn its opinion or its association with the Company’s
        financial statements that it audited for the years ended December 31, 2003
        and
        2002. Therefore, we do not believe that there is any impact of BDO’s decision
        upon the Forms 10-Q and 10-K referred to in your letter. We also note that
        Odenberg, Ullakko, Muranishi & Co. LLP, our current independent auditor, has
        not withdrawn its consent to use its reports on our financial statements
        and
        notes thereto for the year ended December 31, 2004. We have also engaged
        OUM to
        audit our financial statements for fiscal years 2002 and 2003 and will request
        OUM to render a report, which will be incorporated by reference into our
        Registration Statements.

              3.

                We
                  note your reference to your August 5, 2005 sale of 500,000 shares.
                  Tell us
                  about any other sales that occurred under either registration
                  statement.

      The
        Company has not made any other sales of shares under either of the Registration
        Statements. With respect to the Financing Registration Statement, as we noted
        in
        the applicable Post-Effective Amendment, we advised, on or about August 23,
        2005, the Selling Shareholders that until further notice, no sales could
        be
        effected under the Financing Registration Statement. Concurrently, we also
        advised in writing the purchasers of the Company’s shares sold under the Shelf
        Registration Statement that they should make no further sales of the shares
        that
        were sold under the Shelf Registration Statement.

              4.

                Confirm
                  that the registration statements will not be used to offer and/or
                  sell
                  securities until (1) you have made filings that fully comply with
                  all
                  disclosure requirements, including authorized consents for you
                  to use all
                  audit reports required in the filings, and (2) the Commission,
                  or the
                  staff pursuant to delegated authority, declares the appropriate
                  filings
                  effective.

      We
        hereby
        confirm that the Registration Statements will not be used by the Company
        to
        offer or sell securities until the two conditions set forth in the Staff’s
        comment letter have been satisfied. We have also advised our transfer agent
        that
        until further notice, it should not process any transfers of the Company’s
        common shares made pursuant to the Registration Statements. We have also
        advised
        the purchasers of shares sold under the Shelf Registration Statement that
        until
        further notice they should not make further sales of such common shares.

      Form
        8-K, Filed August 5, 2005

              5.

                We
                  note your disclosure that Kim Tsuchimoto was designated as your
                  Principal
                  Financial and Accounting Officer on July 20, 2005. Tell us why
                  the Form
                  8-K was not filed timely, and confirm your understanding that you
                  are not
                  eligible to use short-form registration statements going
                  forward.

      The
        disclosure that Kim Tsuchimoto was designated as our Principal Financial
        and
        Accounting Officer on July 20, 2005, was an error. In fact, our Board of
        Directors did not designate her as Principal Financial and Accounting Officer
        until August 1, 2005, when it acted by means of a unanimous written consent,
        dated August 1, 2005. A draft of the Form 8-K was prepared in late July (and
        dated July 20, 2005) in anticipation of her imminent appointment as Principal
        Financial and Accounting Officer. The draft of the Form 8-K was unfortunately
        not updated when the unanimous written consents were signed by all of our
        directors, and thus the definitive Form 8-K that was filed contained the
        incorrect appointment date. We note that the cover page to the Form 8-K did
        indicate the proper trigger date of August 1, 2005 for the filing of that
        Form
        8-K. In light of the fact that the Company has since accepted Ms. Tsuchimoto’s
        resignation, which was disclosed in a current report on Form 8-K dated August
        29, 2005, the Company has not undertaken to file an amendment to this Form
        8-K
        solely for the purpose of correcting this error because we believe it is
        not
        material to investors at this time. Accordingly, we believe that the Form
        8-K
        was timely filed and we respectfully submit that the Company remains eligible
        to
        use registration statements on Form S-3.

              6.

                Tell
                  us why your principal financial officer and your controller or
                  principal
                  accounting officer did not sign your registration statements as
                  amended on
                  July 27 and August 23.

      Kim
        Tsuchimoto did not sign the July 27 amendments because, as noted above, her
        appointment as the Company’s principal Financial and Accounting Officer was not
        effective as of that date. She did not sign the August 23 amendments because
        she
        resigned prior to the execution of the filing, and was therefore no longer
        the
        Company’s Principal Financial and Accounting Officer.

      Form
        10-Q for the Quarterly Period Ended June 30, 2005, Filed August 9,
        2005

      Note
        12. Subsequent Events, page 17

              7.

                We
                  see that on August 5, 2005 you sold 500,000 of your common shares
                  at a
                  purchase price of $5.40 per share to certain institutional investors
                  and
                  those purchasers were also extended a 30 day option to purchase
                  additional
                  shares at a fixed price of $5.50 per share. Please tell us how
                  you have
                  accounted for this option to purchase additional shares at a fixed
                  price
                  and cite the accounting guidance upon which you based your
                  accounting.

      The
        Company accounted for the 30 day right or option to purchase an additional
        225,000 shares (the “Investment Right”) at a fixed price of $5.50 per share as
        equity, since the Company had an effective registration statement under which
        it
        could have issued registered shares to the Investment Right holders, if the
        Investment Right was exercised. The fair value of the Investment Right on
        the
        date of issuance, August 5, 2005, was $153,000 and was calculated using the
        Black-Scholes option pricing model, using the following assumptions: stock
        price
        $5.77, exercise price $5.50, volatility 54.61 %, risk free interest rate
        3.33%,
        contractual term of 30 days and dividend yield of zero.

      On
        August
        23, 2005, the Company filed a Post-Effective Amendment to the Form S-3 Shelf
        Registration Statement declared effective on July 29, 2005, under which we
        stated that no further sales of securities under the Registration Statement
        would be made until the matters discussed in the Post-Effective Amendment
        are
        resolved. On August 23, 2005, we reclassified the fair value of the Investment
        Right of $94,500 from equity to a liability pursuant to paragraphs 10 and
        14 of
        EITF 00-19: "Accounting for